Chadd Garcia 深挖 LandBridge 的价值

I have Chad Garcia on for his 6th time. Chad is an expert on the Permian and the infrastructure-play space when it comes to energy and the waste-management business, particularly the water-waste-management side. I know a lot of very thankful shareholders who listened to this podcast in November 2024, when we talked about Secure Energy. We'll talk about Secure Energy right at the end because they just had a big deal getting taken out for billions by GFL. That kind of affirms his thesis on the water side, but that's not what we're talking about today until the end.

We're talking about LandBridge, which is more of a straight land play. They're a derivative of everything that's happening in the Permian in Texas. Whether it's data centers, oil, water—you name it—LandBridge is a beneficiary. Chad's been involved there and following it for years, and he's going to talk about the thesis there, why it trades at an optically high headline multiple, and why he thinks there's so much growth and such a good business there, while the market is missing just how good it is.

I'm happy to have Chad Garcia on again. He's a Yet Another Value Podcast Hall of Famer—or Hall of Fame inductee, I'm not sure. Chad, how's it going?

Going great. Going great. How are you doing, Andrew?

Doing great. I was telling you beforehand, you look awesome, man. Chad and I are going to talk about one company, but I think that might evolve into 7 or 8 different companies.

The company we're going to talk about today is LandBridge. I was sending you messages because I think people think you are maybe not the godfather of the Permian at this point, but among small-cap value investors, you're kind of the king of the Permian and all these land plays. You've got LandBridge, WaterBridge. We might talk about Secure Energy, which is certainly not Permian but kind of related, TPL, that sort of thing. But we're talking LandBridge, so I'll stop rambling and toss it over to you. What is LandBridge, and why are they so interesting?

The real godfather is Murray Stahl, who's not with us. Hopefully I can do justice to talking about these names.

Yeah, I mean, you are right. Unfortunately, he passed, and everybody was sending around the recommendation of TPL at $8 per share in 1994 or something. He just held it and rode it. I think a lot of these, as you said, tack-on plays owe him a debt of gratitude.

Well, TPL at $8 was certainly a different business because between then and now, fracking was invented and put to wide use. TPL's definitely a different business.

But if I could just, Andrew, you are right: nobody imagined the fracking and everything. But I think the core thing with TPL—and this is Charlie Munger—the joke is that on their deathbed, every Texas man tells their grandkids, “Never sell the oil rights.”

The great thing about TPL or NRP is that you own these mineral rights, and you never know. If you owned the mineral rights in the 1800s, you wouldn't even know that oil was worth anything. You own them in the 2000s, and there are lots of green things that you're starting to mine for in minerals. You just own a perpetual option, and you never know if that's going to hit in the money or not.

Well, I think even more valuable than mineral rights are the surface rights.

And that's what people who don't know the space miss when they look at something like a Venom, which is a pure oil-and-gas royalty company based in the Permian Basin, or PrairieSky, which is an oil-and-gas royalty play based in Western Canada. Those companies trade in the U.S. at 10 times EBITDA. For PrairieSky, it's more like 16 times EBITDA.

They look at something like TPL, which is 30 times, and they don't really get it because they're equating the two as being the same. Part of it is the same, but there's a lot that's not.

We're going to talk about LandBridge, but I think it's best to go through the history of land-based royalty companies. We can start with TPL because that one is the largest, at nearly $30 billion in market cap, and it's very well known because of the strong price performance it's had for decades.

TPL was formed in 1888 on the back of a bankruptcy of the Texas and Pacific Railroad. The financier Jay Gould tried to build a railroad between Texas and the Pacific Ocean. What do you need? You need lots of land, and the government agreed to give him a certain number of acres per mile of railroad that he built.

He was a little too slow in building it out, and it went into bankruptcy. At the time of the bankruptcy, the government had given him 3 million acres of land. The bankruptcy court took all the outstanding debt, put it into a trust, and then commanded the trust to sell off acres and return the capital to unit holders via share purchases and/or dividends.

At some point, the trust went public. People are a little confused about when it happened. It could have happened as early as 1888, but we know for certain that by the 1920s, it was on the New York Stock Exchange.

If you look at TPL, how does TPL make money? Just under half of the revenue comes from mineral royalties. TPL has a vast portfolio of royalties focused in the Permian Basin. When fracking was developed and put to use there, that value got unlocked. Hence, it's been a 20-bagger since my firm bought it in 2016 or 2017.

They started with 3 million acres. Now they have about 882,000 acres. As you can imagine, if your job is to sell off land, you sold off any land that had value for agricultural use or development use years and years ago. That leaves you with land in the most desolate part of the country, which is the West Texas Permian Basin.

I've driven across there several times, and it looks like you're on Mars in certain parts of it. Completely desolate. There's no value, except that now there's immense value.

And so, the real estate there is probably worth the real estate value of Manhattan.

Oh. [laughter] If you’re directly on top of a big oil well, probably, but aside from that. I do hear where you’re coming from, though.

Yeah. Well, because TPL’s land was laid out in checkerboard fashion, the government gave them, call it, 600-acre squares laid out in a checkerboard fashion. If you have that amount of land, one thing you can do with it is develop infrastructure on it.

Around 2016, 2017, and 2018, they hired some guys from EOG, and they developed a really nice source-water business. Source water is the water that’s used when you frac wells, and fracking takes an immense amount of water, particularly the style of fracking that they’re doing these days. They call it “simul-frac.” If you can deliver vast quantities at one time, I think the E&P companies are pretty price-insensitive to that, so it’s going to be a pretty good business.

It is tied to new drilling activity, so it’s a little lower on the quality scale. But they have a vast amount of acres, and they were able to build up this infrastructure and develop probably the leading source-water business in the basin. That’s about 30% of the revenues.

The next business they have is produced-water royalties. Because they have this large land position, they have pore space. As we talked about on the WaterBridge and probably in the Secure podcast we’ve done in the past, pore space is the geological formation under the land that is suitable for saltwater-disposal wells.

Saltwater-disposal wells handle the produced water that comes up with the oil. In the Delaware Basin, it’s about 4 to 6 barrels of water per 1 barrel of oil. This isn’t the water that’s used in fracking. This is water that was buried with the organic matter tens of millions of years ago, when that organic matter—which has now become oil and gas—was buried.

It’s very salty, maybe 6 to 7 times as salty as the ocean, and it’s been mixed with hydrocarbons. It’s nasty stuff, and that’s what needs to get cleaned and processed. The solids are separated from it and put into landfills, and the water itself is deposited in saltwater-disposal wells. That’s about 16% of their business.

Then you get to surface easements. For an E&P company to drill and frac a well, they need to build out roads, build a drill pad, put infrastructure such as power lines in place, and put in pipes for produced water, source water, and oil and gas. To access TPL’s land, they’re going to charge a fee for that. That’s a really nice, high-quality, recurring-revenue-type business.

They also have gravel pits and sand pits that they use for frack sand, which would be more tied to new drilling activities as opposed to ongoing and recurring activities. This is maybe 10% of the revenue.

Occasionally, they’ll still sell some land, but it’s episodic and sporadic, so you don’t really need to focus on that too much. Lastly, they have next-gen opportunities.

There is a thesis—and Murray was a big proponent of it—that large language models and data centers will gravitate to the Permian Basin in order to access the stranded natural gas there and get off-grid, behind the meter.

That was a great overview, and I think we’re going to be talking about that. That’s the overview of TPL. Why don’t we drive it more toward LandBridge at this point?

Okay. LandBridge is a sister company of WaterBridge, which we did the podcast on in November. Aside from the next-gen opportunity, which we can talk about later, LandBridge’s reason to live is to help WaterBridge grow out its pipeline infrastructure and provide pore space for WaterBridge’s business, as well as for some other produced-water companies in the basin.

Probably about 30% of the water currently comes from WaterBridge, and the rest comes from other operators because LandBridge has a vast amount of pore space. If you look at their business, they categorize it a little differently than TPL.

The first category they use is surface-use royalties. That’s about 73% of the revenue. Most of this is the pore-space royalties they get from the produced-water companies, as well as royalties for fracking water on their land.

The next category of revenue is resource sales. Here, they combine the frac sand, gravel, and source water. That’s about 20% of the business. Like TPL, they have minerals as well, but it’s only 6% of the revenue.

Unlike TPL, they don’t go out and look to acquire more mineral royalties. Mineral royalties generate a ton of cash for TPL, but they’re the lowest-quality revenue stream because once you extract a mineral and the royalty is paid on it, it’s gone forever.

Furthermore, it’s directly tied to the price of oil and gas. As oil and gas go up and down, so does the amount you get paid for your royalty. LandBridge will acquire minerals, but only incidentally. If they come with land that they want, fine, but they’re not going to go out looking for them.

I’d imagine that this would go down over time as a percentage of revenue.

Let me—so, you laid it out, right? If I’m looking at where you’re driving, I think you’re saying, “Hey, if you break out these revenue sources, LandBridge—you’ve laid out what LandBridge is, the comps, and TPL.”

I think what you’re driving toward is that LandBridge is probably a higher-quality business. I don’t know; you can correct me if I’m wrong. I guess I would just say that their 2026 investor day just happened, right? I think the market’s on to it that this is a good business.

At their 2026 investor day, I think it’s the 6th slide, they say, “Hey, we trade for 30 times EBITDA.” They’ve got all sorts of peers: REITs, publicly traded MLPs, and all this sort of stuff. The best comp they list is TPL, and they say it trades at 45 times EBITDA.

So, I want to pose 2 questions. Why the multiple disparity? Go ahead.

Well, a lot’s changed between now and then. TPL is more like 30 times EBITDA, and LandBridge is more like 22 times. But the spread’s still there.

Yeah, it happened literally 2 and a half weeks ago, but I just want to ask: Why the multiple disparity between the 2?

The second question I want to ask is, even if I just look at LandBridge—30, 35, wherever it is—I think to myself, “Hey, the market is on to this. This is a very, very good business.” But if you read what they say, they have a big pushback, which I can quote later or we can go to that.

If you’re on the podcast because you think the market is a better place, this is a risk-adjusted opportunity. So, the second question I ask is: How do you generate alpha from this valuation? I threw a lot out there, but that’s what I’ll drive toward.

I don’t think the market is on to it yet because they did say some things at the investor day that were extremely bullish, and the market reaction has been somewhat muted. There could be various reasons why. We can talk about that, but the valuation is trading at 26 to 27 times EBITDA—maybe 20 to 22 times for LandBridge, and 28 to 31 times or so for TPL.

If you say, “Okay, let’s put a 10-times multiple on LandBridge’s mineral-royalty business, in line with Viper,” then maybe what’s left over is valued a couple of turns higher. So, call it 22 to 24 times.

Now, if you do the same for TPL and say, “Okay, well, let’s put PrairieSky’s 16-times multiple on their mineral package because it’s so vast, and maybe that’s a better comp,” then TPL would be closer to—what’s left over, which is the produced-water business, the source-water business, and the surface easements—it’s like 50 times EBITDA.

You almost have a 20-turn spread between the 2. There may be various reasons why TPL trades at a premium. As Munger said, “Don’t ever sell your royalty checks.” There are a lot of families that have had this for decades, and the rule is never to sell royalties. There’s probably some of that.

Horizon Kinetics has a nice 15% position. They’ve been selling, so that’s been trading down a little bit, but not too much. You have a lot of fans of Murray Stahl, and rightly so, and they’ve been long-term holders. So, you do have a lot of long-term holders there.

Going back to LandBridge, one thing they talked about was the amount of incremental pore space they have in their portfolio. LandBridge has about 1.7 million barrels a day of water being injected into its saltwater-disposal wells, for which it’s getting paid a royalty.

They have over 5 million barrels a day of incremental pore space that's permitted. On top of that, they probably have another 2.5 million barrels a day of incremental pore space; they just need to get it permitted. That shouldn't be a problem. So, call it over 7.5 million barrels a day of incremental pore space.

Management, as well as the chairman, stated several times during the investor day that, while not giving long-term guidance, they could see it pretty easily: In the next 5 years, they could go through 5 million barrels a day of incremental pore space. They presently get paid $0.15 a barrel, all of which is profit. It's a royalty, and there's not going to be any incremental expense associated with it.

You multiply that out and throw some taxes on it, and that means their free cash flow should compound over the next 5 years at a 25% CAGR. And that's without any other growth in the business. That's without any data centers, any royalties for surface use, frac sand, or CCS, or any of that growth. That's just on the incremental pore space.

I'm laughing when you say "without giving incremental guidance," because they said—I think, if I'm remembering the number correctly—that this would generate $300 million of incremental free cash flow. And I think they mentioned that about 15 times throughout the investor day. So I'm just laughing: It's not long-term guidance, but it's $300 million of cash flow. But it's not long-term guidance.

I hear you. I certainly hear you. But I would push back a little bit. This is 22 times EBITDA, 25 times whatever you want to call it. Yes, you do have a lot of free cash flow and growth coming, but you need that just to justify that multiple.

What do you think the market is missing on this? Do you think there's just so much optionality that the market is underpricing the optionality? Do you think the market is doubting that this is a $5 billion market cap, $6 billion EV? Do you think the market is saying, "Management keeps saying $300 million, and we'll believe it when we see it"? What do you think the market is missing?

Earlier in the year and at the end of 2025, there was a pretty heavy short position on the company. My take was that there were a lot of TMT investors who said, "I don't believe the data center thesis. That's a zero. The rest of the business should trade like a royalty business, maybe at Venom as a comp, which is 10 times."

They said, "Okay, well, maybe it's 20 times EBITDA. The 10 to 20—that's the data center value." So I think it was a very easy short for them. And I think they thought that if the short went against them, they would get bailed out because Five Point, the sponsor that brought this public, still has a sizable stake in it.

They figured, "Okay, well, the sponsor will hit the bid if it goes up and unlock some shares." So I think that's what's keeping the value where it's at, when you compare it to TPL, which is, on an absolute basis, 8 to 10 turns higher. And when you adjust out the mineral business, it's 20 turns higher.

You mentioned Five Point, so let me ask about them. I've been on this corporate-dark-arts kick recently. One of the things that really gets me up in the morning is seeing companies give juicy stock-option grants and seeing insiders bullish.

I don't think insiders are bearish here by any means. I've got the quote from the investor day where they say, "Hey, investors are looking at the stock and saying, 'This is the yield on the stock today,' and that's the wrong way to think about it. We've got all these macro tailwinds. There's going to be substantial growth over the next decade with little work." I don't think they're bearish at all.

They own a ton of stock, and there's this complicated structure, but they own it.

I would push back.

Go ahead.

Management owns 13% of the company, and that doesn't even include the Five Point holdings.

But I would push back and say, "Hey, Five Point did several secondaries in 2025, if I remember correctly." With management, you're not seeing insider buying. I haven't seen the aggressive PSU targets or stock-option grants that would suggest that.

I'm not saying there's some pump and that everybody's trying to get out. But Chad is laying out this massively bullish future, and the company is laying out this massively bullish future. I see a secondary from Five Point, and I don't see insiders really buying shares. So why that divergence?

I think they have bought some shares. I'll have to check on that because I was talking to them at a dinner maybe a month ago, and I think they mentioned that they had bought some shares. I'll have to check on that one.

Five Point is a sponsor, and sponsors have responsibilities to their investors. That being said, from here forward—and I don't have any information on this—I would think that you'll see more selling at WaterBridge than you would at LandBridge.

I think LandBridge is the vehicle that the sponsor is going to want to own for as long as possible. They're putting $1 billion into PowerBridge, a separate investment, which, if it works out, will be driving a lot of the next-generation opportunities at LandBridge.

They see more than we do. If something's coming, they're going to know about it, and LandBridge is going to benefit from it without having to put capital up. So I think they'll want to hold on to it for as long as they can.

That actually brings me to PowerBridge. We talked about this with WaterBridge, but you mentioned PowerBridge, and they're very bullish. I want to talk about the data centers in a little bit. They're bullish on a lot of different aspects of LandBridge if you read the investor day and take them at their word.

But it strikes me that they're doing the data centers through PowerBridge, and I believe the fiber is through PowerBridge as well. WaterBridge does the water itself, and then LandBridge is just this royalty play on it.

When you've got these related-party transactions—I was looking at the 2025 proxy, not this year's proxy, and 10% of the proxy is devoted to detailing related-party transactions. At the investor day, I've got this quote that jumped out at me: "LandBridge is the enabler for WaterBridge's growth, and in turn LandBridge benefits from the royalty stream from WaterBridge." It's going to be the same for PowerBridge.

I look at them and think, "Why are these separate companies?" It seems like either too much financial engineering or it's rife with conflicts of interest. I don't understand why these should be separate companies, or why this doesn't— it just makes the hair on the back of my neck stand up.

For one, the LPs of the 3 businesses are all different. They're different funds. It's not like they were all invested in the same funds, so you will have some diverging views there. You have diverging interests as far as the timing of the monetizations of each of these entities.

Number 2 is, look at where land-royalty companies trade. They trade at a huge premium. WaterBridge should benefit by being viewed as a waste company because that thesis seems to be playing out—at least it is in Canada.

But even if they got 5 turns and traded in line with municipal waste on a per-share basis, it wouldn't be anything compared to the premium they get for being a land-royalty company.

Looking at LandBridge, LandBridge should be the beneficiary of all this. They have conflicts committees at each of these businesses. WaterBridge is owned in part by a large E&P company.

It was Devon. Devon was the company.

It's owned by Devon. There are plenty of checks and balances there. Devon isn't going to want to see WaterBridge being taken advantage of for the sake of LandBridge. They have a big stake there.

I don't think there's anything untoward happening. But if you want to be skeptical and say, "Some of WaterBridge's economics are coming to LandBridge," as a LandBridge shareholder, I should—

No, I certainly hear you. It's just that I don't even know why they got into this and made them all different. It seems too weird.

Let me get into something different. I know one of the really interesting things you mentioned a bunch—I mean, they put out a bunch of numbers at the investor day, which I thought were bullish. But the most interesting thing to me was a little line where they said, "Look, they buy stuff, right? They do acquisitions."

I think they did $200 million of acquisitions in 2025. I could be right or wrong on that number. They do bolt-on acquisitions at LandBridge. The most bullish thing they said to me was, “Hey, on our 2024 acquisitions, we increased the free cash flow at those acquisitions by 150% year-over-year in 2025. In 1 year, a 150% increase.”

Obviously, you can’t say every acquisition they do going forward will do that, but they talked about the active land management and how they did that. As somebody who has followed TPL for a while, I remember the old bull case for TPL was, “Hey, go talk to any oil company. They’ll call TPL and they’ll say, ‘Hey, you have land in between our point A and point B. We’d love to pay you money to move water through it.’” And TPL just wouldn’t pick up the phone, right? That was the bull case for TPL: They’re not picking up the phone.

I am 100% a believer that if you’re actively managing these things and calling the oil and gas companies, you can create a lot of value. So, I’d love to ask you the leading question: How are they creating this 150% uplift, and how do you think about that kind of accretive growth going forward for LandBridge when you’re looking at this?

Yeah, so they call this the surface use economic efficiency. They lay this out by vintage, right? As we do this, I think it’s important to talk about how LandBridge got built out. As I mentioned earlier, WaterBridge was first. Around 2019 or 2020, they wanted to purchase land to do a couple of things: 1, to help WaterBridge grow, and 2, to pick up some pore space for it in southern and central Reeves County.

If you go north of that, near the state line with New Mexico, they wanted to be able to bring water from New Mexico into Texas, where they would cross the state line. As we discussed on the WaterBridge podcast, New Mexico has way more water than it can handle within New Mexico because of regulatory process issues, lack of pore space, et cetera.

I remembered it from our pod, but one thing that jumped out to me just reading this investor day was how they were all kind of laughing and saying, “We’ve got Texas, and if you’re in New Mexico, you really need to come to us because New Mexico is kind of a piece of work.”

There is some pore space that you could use for saltwater disposal in New Mexico, but it’s not much, and even if the regulatory regime changed, the E&P companies aren’t going to trust it. Because if you don’t have takeaway for your produced water, your production shuts down. And so, they want to sign 10–15-year deals that guarantee the water’s gone and never think about it again.

The water needs to cross from New Mexico to Texas either from the north-south border or on the east-west border into the Panhandle. A big chunk of land was owned in checkerboard fashion in Loving County, on the western part of Loving County, by TPL. Every landowner’s land that you crossed with infrastructure is an opportunity for somebody to take a toll.

LandBridge or WaterBridge wanted to unlock the checkerboard, so they went and filled in the checkerboard, buying all this land that abuts TPL’s. Because they did that, they were able to enter into an agreement with TPL to allow free crossing for both and use of some pore space, et cetera. So, basically, that was the first deal that they did that unlocked pore space, and they’ve grown the SUEY by 14% since they bought it.

That was the first acreage. The second acreage is a big one. That’s the one that went up 150%. When we talked about this on the WaterBridge podcast, WaterBridge under-pressurized its pore space compared to the rest of the industry. Then the regulations changed in the rest of the industry to bring the rest of the industry up to WaterBridge’s standards.

There are various reasons why you don’t want to over-pressurize your pore space. But if you look at the TPL–LandBridge AMI and go immediately east of that, that area along the state line was the first area where shallow water disposal wells were used, and that whole area has been over-pressurized. There’s not going to be too much incremental pore space there. In the next 3 to 5 years, we’ll probably be losing 2 million barrels a day of pore space there because the wells aren’t going to be usable anymore.

WaterBridge and LandBridge picked up that pore space was going to be key. So, what they did in the 2024 acquisition is, if you look at the Panhandle, where the southeast corner of New Mexico is, they basically locked it up with respect to the pore space in Texas and access to that pore space at that corner. They bought themselves a bunch of pore space, and they have a blocking position.

That is probably, as of right now, without any data centers online, the highest-value land that they have, just because it gave them all this incremental pore space and a blocking position. For example, there are competitor pipelines that cross that. I think Engeol has a pipeline that crosses it, and I think it hits some TPL pore space.

That pipeline that crosses it, looking at some industry data, probably handles 300,000 barrels a day. There’s likely a cap—an agreed cap—on how much can go through that pipeline. Once that pipeline gets filled up to that cap, the competitors will have to come to LandBridge and negotiate an agreement for what they’re going to pay them for anything in excess.

Yeah, so that was a very strategic piece of land that they bought. They sounded very confident about future agreements on water in the call. One more thing on that: The 3rd-biggest acquisition of land that they did was in October 2025. This was the 1918 Ranch.

Some of that ranch is very suitable for data centers, but let’s set that aside. They did pick up 900,000 barrels a day of incremental pore space that adjoins, is contiguous with, and abuts the pore space that they bought in 2024, kind of at the southeast corner of New Mexico. They paid $375 million for that land. It has $20 million of EBITDA currently. If you pro forma out the value of that pore space, it’s about $75 million. So, they paid 3.3 times EBITDA for this land.

Really, they’re the only ones that could do that because if you’re a competitor and you wanted to access that land with water coming from New Mexico, well, guess what’s between it? LandBridge land.

They made this point on the call, and I especially liked when they were like, “Look, who do you think we’re going to compete with? Hedge funds are going to go buy this stuff for 14x? Get the F out of here.”

I guess the one competitor I’d ask you about is TPL. Why wouldn’t TPL—and you’d still get oligopoly pricing—compete with them and say, “Hey, you guys have over there, we have over here. We can compete for all the incremental acquisitions?”

Well, TPL has been buying some pore space, including the pore space we just talked about, which is accessed by the EnLink pipeline. So, that was interesting. But what makes LandBridge and WaterBridge valuable is that you have the combination of both companies working together.

For pore space to be really valuable, you need to have a lot of incremental pore space, and you need to be able to hit multiple different saltwater disposal wells because it provides what they call flow assurance to the E&P customers, which would enable premium pricing. TPL built out a source water business because it’s much easier to handle that type of water.

Produced water is a little tougher to handle. I don’t think they wanted the headache of it, and so they don’t have infrastructure; they just have the land.

I was just reviewing my notes, but the one thing, when you say, “Hey, you’ve got LandBridge and WaterBridge working together, that’s one of the reasons you unlock this and people want to work with you,” I won’t belabor the point, but again, it just seems like they belong together.

The last thing I want to hit here is data centers. The company is really talking about data center upside. You mentioned, I think, one of the reasons people got excited about the stock last summer. One of the reasons people got excited about TPL was that Murray was big on this: A lot of data centers are going here.

Again, the company has a joke: “Hey, maybe we start building data centers on the moon or start putting them in space.” But until then, it seems like the incremental is going to West Texas in particular. So, I’d love to ask you: What’s driving the incremental? Do you think that’s real? When do you think it starts impacting LandBridge, and how do you think about that opportunity as it relates mainly to LandBridge, but also WaterBridge?

Right. Well, there hasn’t been a large hyperscaler data center definitively announced in the Permian Basin yet.

But we are starting to get little glimpses.

I thought Facebook had one. I'm going to—while you're talking, I'm going to look at this.

Facebook is in—I believe that Facebook is looking at some land in Ector County, from what I hear, and then their big one that's announced is in El Paso.

Oh, okay, so you were just referring specifically to the Permian, because I'm looking at slide 34 in their investor deck. They've got 12 different data centers all around West Texas. I was like, there's no way that's true. But you're saying that in the Permian, we've yet to see some kind of reach in there. Okay, cool.

We've yet to see that happen. Now, Chevron announced at its analyst day in mid-November that it wanted to put a power-generation facility in West Texas. They never said where. I was using AI and Google Alerts to check for tax abatements because they said one of the 2 things they needed was the requisite tax abatements, and then they needed an offtake agreement.

To give you some perspective on the size of this, this is envisioned to be a 2.5-gigawatt power-generation facility for data centers that is expandable to 5 gigawatts. It would cost between $5 billion and $7 billion for the first part of it. Their LTM CapEx is $16 billion. So this could be a real project, right?

In December, we found that they were filing for the tax abatements in Reeves County, and we found some environmental air-quality permits that Chevron filed. When you were talking about it, I was thinking, it was in Reeves County, which is like the heart of TPL and LandBridge land. This power-generation facility is contemplated to be on 6,000 acres. A lot of those acres are TPL acres, and it abuts LandBridge acres. There may be a role for both of them in this if it comes to fruition.

It was announced a couple of weeks ago that the offtake agreement is being contemplated with Microsoft. It could also be with BOLT. BOLT can jump in there. That's the business that TPL invested in in December. It's run by Eric Schmidt of Google, with a stated goal of bringing 10 gigawatts of data centers to the Permian Basin. So you're starting to see a few nibbles, and LandBridge itself has an agreement with NRG, which was announced in September, to build another power-generation facility there.

Of course, it needs its tax abatements, which it's in the process of getting. So you're seeing the power first, but before I'm going to say it's going to happen, you need the offtake agreement with a hyperscaler. It's fits and starts, I would say. If we were doing this in January 2025, the DeepSeek news was like, "Oh, it's an overbuild," and then by March everything was going. But it seems like there's just such a rush, and as an investor you see Talen or Microsoft or whatever and you're like, "When is it going to stop?" Look, at one point we'll be overbuilt, but every new model just gets better and better, and the rush is there. Power is the bottom line.

I do think the reason why we haven't seen it yet is that the agreements that are going to have to be negotiated among the various parties are going to be highly complicated. Let's say you're Amazon, right? You have a bunch of chips that you've paid for, and you have capital costs on them. So you want the data centers and the power-generation facilities to deploy them on time. You want a certain amount, and you want guaranteed uptime.

These contracts, if they're going to happen, will probably be 10 to 15 years. The power-generation facilities and the data-center providers are going to want 20 to 25 years. The damages both ways could be immense. So it makes sense why this is taking a bit of time.

If you look at—you mentioned Talon. PowerBridge is led by the former CEO and CFO of Talen. He left to form Cumulus, which was a company that took 2 Talon nuclear power facilities in Pennsylvania. Before this, there were 0 data centers in the state of Pennsylvania. He secured power from the 2 nuclear power plants and built out a power shell.

He said that there was nobody who wanted anything to do with this project until it was complete, and then, once it was done, there was insatiable demand. It was sold to Amazon, which subsequently committed $20 billion to build out this campus. It then attracted Blackstone, QTS, and others to this facility. It's $100 billion of capital.

He sees the same opportunity in the Permian and went to run PowerBridge to make it happen. I know it's somewhat affiliated because of the common ownership or control of Five Point, but Five Point is funding this separately. It's not going to be any capital from LandBridge that's going to be required to make this happen, right?

As you and I are talking, LandBridge trades for about $70 per share—$67.58 as we're recording. Let me just, again, we laid out numbers, and the deep-value investor in me says, "Oh, I'm just going to choose 25 times EBITDA." Twenty-five times EBITDA—that's expensive. I would also say, 25 times EBITDA here versus what Walmart is trading for at 50 times P/E, I'd probably rather pay 25 times EBITDA.

Yeah, EBITDA is very clean. It's very clean, and there's some other stuff, but it's very clean.

But I guess I would just ask: the growth story is great here, right? There's a great growth story. You've got the data center; everything is talked about. How do you think about fair value here? I know you love this company and you think it's got a very bright future, but where would you say, "Hey, this is the fair value you've kind of incorporated"?

It's hard when you've got 25% to 30% incremental growth with no risk, as far as I can see. It's hard, but how would you think about how this should be valued?

I don't know. If you look at a low-single-digit free-cash-flow yield and then you add on the 25% to 35% free-cash-flow CAGR over the next 5 years, it doesn't scream too expensive from that basis. And then you get all the free options.

I don't think the data centers need to hit in order for this to work out well, just because there's an ample amount of growth just from the water part of the business. You can see it if you look at WaterBridge and see the announced projects that they have. You can get to 1 million barrels a day of incremental water flow per year for the next 2 years just on projects that have been announced.

I noticed you didn't give a firm fair-value number, but I will let that slide.

Yeah, I mean, that's the tough thing with options. I think in the triple digits is pretty reasonable. You start applying TPL multiples to this thing, and you get to $150 pretty quick.

Let me ask you a different question, and this will start bridging at least to—I think the last time we had you on was—I can't believe it was already November. If you had put a gun to my head, I would have said, "Oh yeah, Chad was on in early February," I think. I can't believe it was November.

The last time I had you on was for WaterBridge. I've talked about both WaterBridge and LandBridge on this podcast. I said, "Hey, I don't understand why these 2 aren't combined. They both have great upside, and they're interrelated."

But I just asked you—I put you on the spot. If a listener was like, "Hey, I'm going to go back and listen to Chad in November on WaterBridge, and I'm going to listen to Chad on LandBridge now," which is the one that you would say, right now, is the better opportunity—the one they should be focused on? What would you choose if I was making you choose between 2 of your children?

I own them both, but I think LandBridge probably has the most free-cash-flow-per-share growth of the 2, and it has ample rerating opportunities: A, because of the growth; B, because of the differential between it and TPL; and C, it's got the free call option on the data centers.

Whereas WaterBridge will have nice double-digit growth as well, that you can easily build the bridge out and see, just because of the announced projects. And it could also have a rerating of the multiple if the municipal-waste thesis gravitates down to the Permian, which it should, because I think Secure is going to certainly shine a big light on that one. But yeah, at current prices, I think LandBridge.

Well, that was a great move to the last question. I wanted to end with a little update on Secure. The 4th time you were on the podcast was for Secure. This is a Canadian company, and your thesis was, "Hey, people look at this as an energy play, and it is not. It is water management; it is an infrastructure play; it's waste management up there."

And the reason I bring Secure up for a little update, first, is because I think there are a lot of Yet Another Value Podcast guests who should be thanking you. I know there were a lot of inbounds and a lot of people who I think bought the stock on the Hillstad.

But Chad, they just got bought out—I mean, 7 days ago, they got bought out by GFL. I'm sure that's bittersweet for you because, on the one hand, it is a validation of your thesis, right? Your thesis was, “Hey, people look at Secure as an energy play, and it is not. It is water management, infrastructure, and waste management up there.” On the other hand, I think a lot of shareholders were a little disappointed by the multiple, yeah. Just before you and I started recording, Abrams Capital—which might now be the largest Secure shareholder—no, they're the second-largest—boosted their stake over 10%, and they said, “We're voting against this deal. We don't think it's a fair value for Secure.” I know a few other shareholders who have said they're disappointed by the price.

I'd love to ask you about it. You've got the Secure deal, which kind of validates the thesis, and I think you think the thesis is moving down to WaterBridge, so we can talk about that, or we can talk about how you think about the Secure deal. People should listen to the Secure episode—I think it was a really good one.

Go back to 2009 through 2015: Secure was 50% energy services, and it was in the name, Secure Energy Services. They subsequently changed it to Secure Waste Infrastructure Corp. The analysts who covered it were energy-services analysts in Canada, so it was definitely viewed as an energy-services company.

The management, to their credit, said, “When the oil prices got smoked in 2015, that really didn't work out well for us. We're going to change this business to be much more recurring in nature.” They did so. Twenty-five percent of the business is their gathering and transportation pipelines, and 75% is their waste business, 80% of which is recurring revenue from ongoing production. There's a small part of that business tied to new drilling, but most of it is all ongoing production—very, very recurring.

It was that management team that started making the case that they were not an energy-services firm; they were a waste company. They have long-term contracts and durable waste streams. This was proven out even last year, when oil prices were down and the rig count in Canada was down 20%, but their volumes held up.

They have higher margins and higher ROCs than the waste companies because they don't have the trucks. They don't have the trucks that they have to keep investing in to collect the waste, which is a very expensive collection asset. My thought on that podcast was, “Okay, I think these things should trade in line with municipal-waste companies.” Even if there is a little bit of a negative with the 20% of the waste business tied to new drilling, it should be made up by the higher ROCs and higher margins that Secure has.

Maybe it's a push. They should trade the same. Municipal-waste companies have agreed with me. If you look at Waste Connections, they bought R360 several years ago, which is a waste-focused landfill in Texas. Secure had rolled up 90% of the business, and the Canadian Competition Tribunal made them divest 20%. Who bought that? Waste Connections. They validated it.

Now you have GFL going in there and trying to buy the rest for 11 times. It wasn't the 15 times that a lot of the municipal-waste companies are currently trading at, but it certainly validates the job that management has done. I was a little disappointed with the price, but if you take a look at it, the stock is up 77% in the last year and 465% in the last 5 years. This is probably a crowning achievement for them, so I was a bit happy for them.

As a GFL shareholder, I think it brings a lot to GFL. GFL is going to be able to increase organic growth because Secure has price and volume. For the municipal-waste companies, organic growth in the last few years has been more driven by price as opposed to volume. Secure has both price and volume.

The municipal-waste companies have been doing a lot of tuck-ins—that's kind of what they do. Secure has opportunities to do that, as well as more greenfield and brownfield growth. It's going to be margin- and ROIC-accretive to GFL. GFL is pretty savvy with capital allocation, so maybe they can divest a chunk of the pipelines and free up some capital for share repurchases. It'll be interesting to see.

I forgot you were one of the godfathers of the GFL thesis as well. Let me just ask: You mentioned that it's a crowning achievement and that the stock has done well. Are you disappointed by the price? If I can ask, are you voting for the deal? What are your thoughts?

I don't know. I need to think about that. As a GFL shareholder, I wouldn't mind seeing them come together, but I do think the price is too cheap.

If I was putting on my arbitrageur hat and looking at that, I don't 100% disagree with you. Management has done a good job here. I think management owns 2%, and they're in a support agreement. I forgot there was one larger shareholder who owns 20%, and they're in a support agreement. I'd have to guess—I think in Canada, they remove the ones that are locked up in the support agreement. I think it's going to be two-thirds of all the shares, but 50% of the ones that aren't in the support agreement.

I wasn't talking about bump potential. If a company you own gets acquired for a premium and the company was shopped, then you kind of just sit the bid. I don't know if this was shopped, but I look at it and say, “Management and a large shareholder are under a support agreement. There were probably only 3 strategic players and 7 private-equity firms to reach out to here. I guess they got the highest price they could.” After that, I'm kind of like, “I get that it's a disappointing multiple, but this was probably fully shopped.” Isn't this just worth taking the bid?

I don't know. I'm an outsider looking in, but that's just what's tingling in the back of my head.

I think the thesis was just playing out. They recently changed their name, but the GICS code hasn't even been changed, so they still have an energy GICS code. They did change the industry code in Bloomberg, which just happened. The financial reporting just got changed as well.

If you recall from the podcast, they had to report pass-through oil on a gross basis as opposed to a net basis, so it made the business revenue look much more volatile than it is and made the margins look a lot lower than they are. The company screened horribly. That just changed in Q4.

I remember going to the Raymond James conference a year ago, and there were maybe 12 people in the room listening to the story. There were between 30 and 40 people in the room this year listening to the story. I think there was a lot of traction they could have gotten with new investors.

I get it. I don't disagree, but the GICS code is helpful. I think people have different views on it. It's certainly helpful for finding companies, and maybe for smaller investors as well. But you have a strategic buyer who, again, I think this was probably fully shopped. You have a strategic buyer saying, “This is the price. This is the high bid.” Isn't that just kind of the signal?

Or do you think it's just, “Hey, if we played this out for another 18 months, the earnings growth was so great that it would have been much more in demand”?

Just look at some of the research reports that talk about GFL not being a pure-play municipal-waste company anymore. I'm like, “Well, okay, what about Waste Connections? Are they a pure play like them?” I mean, 6% of their business is in their E&P business, and they made an acquisition in 2024, which is the Secure business, and then they made another acquisition in Q1 2025, which was a small, private, Texas-based produced-water company.

Is it like Republic, whose industrial business is 10% to 11% of its revenue, and where its oil-and-gas business sits? There are no pure plays. Even the sell-side analysts are getting this wrong—not all of them, but a lot of them. I think there was a lot of education left to do.

Again, as you and I were talking just a couple of hours before today, Abrams Capital went over 10% and bought stock right around here, and they're saying they're voting against SES. We'll see how that plays.

Yeah. What's interesting is that I don't think Abrams goes over 10% on any of its positions, or much over 10%. I don't know much about Canada or the rules in Canada, but I know in the U.S. people are very hesitant to go over 10% unless there's a very good reason to.

I'm sure there are obviously some companies they backed from the start where they're over 10%, but from a straight-up equity investment, I don't think they usually go much over 10%.

And so, if you look at the release from today—the press release—they were very close to 10%. They didn't have to disclose that until they went over 10%. So they did go over 10% by buying a little bit more shares today and then coming out saying, “We're against the deal,” but obviously they want to be public about it now. What's interesting is that that's a firm that a lot of people ride on their coattails.

This thesis—the produced-water thesis—and its similarities with municipal waste, as I said, I still think there's a lot of education that the market needs to learn about, and this should help it. Cool. Well, hey, Chad, this has been great.

Thanks for having me on. I'm looking forward to catching up in the near future.

Looking forward to having you on in the near to medium future. And yeah, look, I think, just going backwards, there are a lot of SECURE shareholders over the past couple of weeks who owe you a huge debt of gratitude.

And I know who owes the podcast a huge debt of gratitude.

WaterBridge has been similar, and LandBridge is a fascinating story. So, all right, Chad Garcia, we'll talk soon. Later, buddy.

Have a good day.