One of the most anticipated events of this year for me was the IPO of Waterbridge , the sister company of Landbridge, a company about which I have spilt much digital ink.
Hi Ben. I think you missed cost of goods sold in your EBT calculation. They are $267mln, so EBT is actually $117mln ($630 revenues - $267 COGS - $68 SG&A - $179 Interest). It changes multiples by a lot. It's not anymore 6x EBT, but rather ~20x EBT.
Also, their CAPEX for 2024 was almost $190mn. Part of that is of course growth CAPEX, but part of that is maintenance for sure (they mention it in S-1), which reduces EBT even more. Let's say 30% of CAPEX is maintenance, then we have to subtract another $57mln. So EBT is 117-57=$60mln in the end (38x multiple and only 10% margin).
Ben , this is good. But I've a question which stop me , do you know if the water disposed was found leaking and damage the enviornment , who has the legal responsibility ? LB or WBI ?
I try to find this answer myself , but James also didn't mention it or it's just not important at all in your thesis ?
One immediate concern I’d be grateful if you could answer is with approximately 30% of rig closure in The Permian recently (I hope I got this figure correct) with subsequent lower oil production won’t this mean less water from WBI to process meaning less revenue?
Is the flip side with higher prices production will ramp up again?
Finally if the Permian is depleting (not sure if you agree) again won’t this be a problem for WBI and is the whole onshore/offshore argument where many argue the future is offshore relevant to WBI’s model?
- Yes lower rig count might reduce the hydrocarbon production short term one the drilled but uncompleted wells are finished (DUCS). May affect revenues short term but marginally, there are some fixed payments in the agreements as I understand them. rig productivity is much improved at the cost of a higher water cut though.
- If you revise the '70s, that seems to be a decent blueprint re: drilling act - oil price environment I believe might be ahead
- Permian isn't running out of hydrocarbons any time soon - as always merely a question of price - I'm starting to think the geopol situation makes tier 2-3 acreage in permian more attractive than some longer term offshore deals. Lower tier acreage is more gassy and even higher water cut.
Hi Ben. I think you missed cost of goods sold in your EBT calculation. They are $267mln, so EBT is actually $117mln ($630 revenues - $267 COGS - $68 SG&A - $179 Interest). It changes multiples by a lot. It's not anymore 6x EBT, but rather ~20x EBT.
Also, their CAPEX for 2024 was almost $190mn. Part of that is of course growth CAPEX, but part of that is maintenance for sure (they mention it in S-1), which reduces EBT even more. Let's say 30% of CAPEX is maintenance, then we have to subtract another $57mln. So EBT is 117-57=$60mln in the end (38x multiple and only 10% margin).
Hi Maksim,
You're right about the COGS I skipped a line - I've updated the piece now thank you.
I'll refrain from CAPEX until I get a better line of sight, it might be better than expected.
Growth in handling fees is the big one for WBI which I'll consider in the next piece.
Ben , this is good. But I've a question which stop me , do you know if the water disposed was found leaking and damage the enviornment , who has the legal responsibility ? LB or WBI ?
I try to find this answer myself , but James also didn't mention it or it's just not important at all in your thesis ?
Hi,
My understanding is the primary liability would be with water bridge
Ben I really like this thesis.
One immediate concern I’d be grateful if you could answer is with approximately 30% of rig closure in The Permian recently (I hope I got this figure correct) with subsequent lower oil production won’t this mean less water from WBI to process meaning less revenue?
Is the flip side with higher prices production will ramp up again?
Finally if the Permian is depleting (not sure if you agree) again won’t this be a problem for WBI and is the whole onshore/offshore argument where many argue the future is offshore relevant to WBI’s model?
Thanks Mike.
A few thoughts on that:
- Yes lower rig count might reduce the hydrocarbon production short term one the drilled but uncompleted wells are finished (DUCS). May affect revenues short term but marginally, there are some fixed payments in the agreements as I understand them. rig productivity is much improved at the cost of a higher water cut though.
- If you revise the '70s, that seems to be a decent blueprint re: drilling act - oil price environment I believe might be ahead
- Permian isn't running out of hydrocarbons any time soon - as always merely a question of price - I'm starting to think the geopol situation makes tier 2-3 acreage in permian more attractive than some longer term offshore deals. Lower tier acreage is more gassy and even higher water cut.
Thanks Ben