Water and Power: The Dual Engines Driving LandBridge’s Explosive Growth
Thoughts Following LandBridge's Inaugural Analyst Day
On March 19, 2026, LandBridge held its inaugural analyst day. The event focused on two key drivers of LandBridge’s business. First, its current core business, which provides pore space for produced water. Second, the side of the business that likely gets most investor attention, its data center opportunity. To get directly to the point, the issues were distilled nicely by an investor’s question (1).
“It was mentioned earlier that it’s possible to realize $300 million in free cash flow in the next five years from the pore space business……..but if you achieve that, that’s like a 28% CAGR over free cash flow and a durable growing free cash stream like that has a lot of value. Then I look at the data center business, which is still proof of concept, that seems more like a call option. And I look at how you trade, it looks like the stock trades based on sentiment of when the data center business goes from proof of concept to execution phase. So how do you think long-term investors should balance between the valuations of the two business?”
As the investor pointed out, in LandBridge’s produced water business, you have a durable, high-quality, and rapidly growing stream of free cash flow. Such free cash flow streams are typically richly valued by investors. I think that the 28% CAGR of the company’s free cash flow referenced by the investor may even prove to be low. Separately, there is the data center opportunity. At this point, it is still in the proof-of-concept stage of its life, although there are strong indications that the execution phase may begin soon. Five Point, LandBridge’s sponsor and controlling shareholder, brought out the big guns to discuss the data center opportunity. Presenting at the analyst day was PowerBridge CEO Alex Hernandez; he was also the former CEO of both Cumulus Data and Talen Energy. Cumulus built a 1.1GW behind-the-meter data center complex in Barwick, Pennsylvania. PowerBridge is replicating this play book in the Permian. That said, with the massive free cash flow growth inherent in the pore space business, LandBridge looks cheap without the data center opportunity. Let’s look at both sides of the business, their free-cash-flow implications for LandBridge, and LandBridge’s valuation.
“Water is the driving force of all profits” – Leonardo da Vinci…probably
The heart of LandBridge is its pore space business. I’ve written extensively on it in the past (2), so I will not go into to detail on how it was built and how it works. For that, refer to the earlier articles. I would like to go into its growth and value to LandBridge. First, review the two maps from Analyst Day Slides (3) below. In the first map you get to ~4.6mmbpd of excess pore space capacity. The second map mentions 7.3+ mmbpd of “existing and potential” produced water handling capacity on LandBridge acreage. The 4.6 mmbpd is what is permitted and the difference is the potential acreage. Meaning LandBridge owns the land, the expensive part, to accommodate 7.3+ mmbpd of incremental produced water, but only 4.6 mmbpd is currently permitted. So what does the growth of the pore space business look like over the next five years?
As noted in the investor’s question in the opening paragraph, early in the analyst day presentation LandBridge management mentioned 5 mmbpd of incremental pore space that can be exploited over the next five years (4). Before looking at the economics of this, let’s look at the possibility of LandBridge adding 5 mmbpd of pore space royalty volumes. Starting top down, you have water-to-oil ratios increasing. You also have production increasing in New Mexico, and New Mexico has limited in-basin saltwater disposal (SWD) well options.
Recycling produced water is an option for disposal, but in the Delaware Basin, you have produced water volumes that are 4x of what is needed for hydraulic fracturing. Even if you connected a Delaware Basin disposal network to a Midland Basin disposal network, there would still be ample produced water to dispose of after all the needs of hydraulic fracturing are met.
B3 Insight (5), the leading Permian water market trend forecaster, estimates by 2035 that there will be an ~8 mmbpd shortfall in Delaware Basin Water handling capacity driven by increased produced water volumes and the loss of ~2 mmbpd of pore space due to over pressurization.
So, if the leading Permian water forecaster is calling for an 8 mmbpd shortfall by 2035, LandBridge increasing its water handling by 5 mmbpd in five years is not that farfetched. One could look at what is going on at WaterBridge, LandBridge’s sister company, to come up with water growth on a bottom’s-up basis. To start, WaterBridge has the Speedway project coming online this summer. An expansion of this project, Speedway 2, is currently in open season, and should come online in 2027. In August of 2025, it was announced that Devon entered into a pore space reservation agreement with LandBridge (6). The reservation will commence in 2Q 2027 with WaterBridge expected to begin spending capital to support this growth in 2026. While there has been no formal announcement yet, it has been much discussed that the Sour Gas Window will soon be exploited, which should kick off the development of Speedway 3. So, based on announced and discussed projects, one can get close to an incremental 2 mmbpd of pore space used at LandBridge by the end of 2027. This pace of utilizing an incremental 1 mmbpd of pore space per year is without any growth in the base business. Looking at that pace, it seems reasonable to hit the 5 mmbpd of growth over the next five years.
If one assumes that the only growth that LandBridge realizes is from the 5.0 mmbpd of incremental pore space over the next five years, and that LandBridge is paid the current market rate as a royalty for use of its pore space (15 cents per barrel), then LandBridge’s free cash flow should compound at an ~25.6% CAGR over the next five years. Pore space is finite, so it makes sense that the rate that LandBridge charges for it should go up over time as pore space is utilized. Increasing it by 5 to 10 cents per barrel drives the CAGR up to 31% to 35%. LandBridge’s current 2026E FCF Yield (7) of 3.2% seems quite reasonable for a 5-year FCF CAGR this high.
Data Centers in the Permian
With power constraints and grid limitations are shifting data center development away from traditional hubs, such as Northern Virginia, to resource rich regions, it seems like a major data center on LandBridge property is just around the corner. Chevron, with ample natural gas minerals in the Permian Basin, is looking to capitalize on this by building a 2.5GW power generation facility in “West Texas”. I wrote an article last December which shows the exact location of Chevron’s proposed facility (8). LandBridge validates the article by including the location in the map of confirmed projects exhibited below. In addition to the Chevron power plant, LandBridge itself announced a 1.1GW power plant last September in a partnership with NRG (9). At the analyst day, management said to be on the lookout for another power plant announcement with an independent power producer. Setting power aside, you have a couple announced data centers in the Permian. First, you have CoreWeave’s 2GW project and Nscale’s 1.2GW project, that supports a GPU cluster for Microsoft.
As mentioned above, PowerBridge CEO and former ERCOT board member, Alex Hernandez, participated in the fireside chat on energy-digital convergence. While at Cumulus, his team developed a hyperscale campus that was directly connected to Talen’s Susquehanna Nuclear Power Plant creating a behind-the-meter solution. The project was subsequently acquired by AWS and is part of Amazon’s $20B commitment to build multiple AI/cloud innovation campuses across Pennsylvania. At present, the campus is zoned for up to 15 data center buildings and is attracting other companies aside from Amazon, as evidenced by Blackstone/QTS buying some adjacent property. Pennsylvania, after starting with no data centers, is now a 7.5GW market which translates to $100B of investments. Alex believes that the Pecos, TX area is headed in the same direction as Berwick, PA. He chose to become CEO of and invest in PowerBridge to capitalize on the opportunity.
Alex noted that 40% of the capital costs and 50% of the operating costs of data centers are related to power and energy. Large data centers will need to be connected directly to power generation. To capitalize on the opportunity, PowerBridge/LandBridge has identified five target campus developments to work on. These five locations have abundant amounts of contiguous land, have ample access to water (through WaterBridge and LandBridge), have access to a fiber ring (which PowerBridge is developing), have access to the existing power grid, and are located where natural gas is plentiful. On the fiber ring, PowerBridge is breaking ground later this year on 1,200 miles of fiber routes, which will connect the Basin with major metropolitan areas. Each of the five target locations is targeting 2 GW campuses that are expandable to 3 GW.
So, what does 10 GW to 15 GW of data centers on LandBridge land mean to LandBridge financials? Just on the lease and other land-based royalty streams, LandBridge estimates annual free cash flow between $10mm and $20mm per GW of data centers. This is without any water, the economics of which would likely be split between WaterBridge and LandBridge. With respect to water, Horizon Kinetics (10) has done some good work on this and estimates that each GW can generate around $100mm in revenue for water if it is used for both cooling and power generation.
For fun, I created some charts below that show LandBridge’s free cash flow and its free cash flow growth rate over the next five years at various rates charged for its incremental pore space and at various levels of data centers on its land ($15mm per GW and no economics for water). Now I know that there will not be 15 GW on the LandBridge land in 5 years, but let’s just keep it simple. The charts below show a couple of things. First, even with no data centers, the free cash flow growth is healthy. With data centers it is massive. Now, what will likely happen is that the FCF CAGR will probably end up looking like what is exhibited in the “0 GW” column, but the rate will just be over a longer period. Probably worth repeating, that water will make the growth even more massive than what is shown below.
Conclusion
Taking it back to the investor’s question that the article started off with, the pore space side of LandBridge’s business generates a high-quality and rapidly growing stream of free cash flow. Based on the pore space business alone, the stock should trade at a much higher price than the current $73 per share (7). The data center business seems like a free option. If the data center option hits, then LandBridge will be on a path to generate $1B of free cash flow annually. There should be a point when the value of the data center option hits the stock price as if someone is flicking a switch to turn on a light. Alex Hernandez noted that there was zero interest in the Berwick project until after the first powered shell was built. Afterward, there was an insatiable demand for the project. He emphasized this by saying “There were zero data centers in Berwick in 2020, but I think just one man’s opinion, we’re at the same inflection point and all signs of commercial activity of growth to acceleration and to deployment given the attributes that this ecosystem has. And I’ll finish just very briefly with some people that you may know, Jobs [Steve Jobs] briefly said don’t be trapped by dogma. Don’t be trapped by the fact that people say West Texas won’t work.” I, for one, think it will work, but even if it doesn’t you have a company growing its free cash flow at a massive CAGR. Finally, given that LandBridge is a faster growing business, with more durable free cash flow, than its closest comp, TPL, it would not surprise me if LandBridge at least closed the valuation gap. If LandBridge traded at TPL’s 2026E EBITDA multiple (7), that would imply a share price for LandBridge of ~$160 per share, an ~118% premium to its current price. I’ll leave you with one last thought. If the pore space forecasts are correct, then WaterBridge will also be major beneficiary.
Appendix
Two Companies Market Safe from The SaaS Apocalypse
The Devon / Coterra Merger is Good News For WaterBridge and LandBridge
LandBridge: It's the Pore Space Stupid!
Drilling Down Between The Parallels Between Produced Water and Municipal Waste
https://s206.q4cdn.com/931981395/files/doc_presentation/2026/19/LB-2026-Investor-Day-Deck_vFinal_03_19.pdf
https://www.b3insight.com/
Pro Forma for the 1918 Ranch Acquisition, and as of 3/26/2026.
https://www.landbridgeco.com/investor-relations/news/news-details/2025/LandBridge-Announces-Strategic-Agreement-with-NRG-to-Power-Potential-Data-Center-in-the-Delaware-Basin-Texas/default.aspx
https://horizonkinetics.com/app/uploads/Horizon-Kinetics-Q4-2025-Commentary-Final.pdf
Disclaimer: For informational and entertainment purposes only. Not an offer or solicitation for any security. Do your own due diligence.