As filed with the U.S. Securities and Exchange Commission on May 11, 2026.

Registration No. 333-295113

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

EagleRock Land, LLC

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Texas		6792		41-3142321
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

9655 Katy Freeway, Suite 375

Houston, Texas 77024

(713) 280-7002

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Greg Pipkin Jr.

Chief Executive Officer

9655 Katy Freeway, Suite 375

Houston, Texas 77024

(713) 280-7002

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Michael S. Telle Scott D. Rubinsky Vinson & Elkins L.L.P. 845 Texas Avenue, Suite 4700 Houston, Texas 77002 (713) 758-2222		Ryan J. Maierson John J. Slater Latham & Watkins LLP 811 Main Street, Suite 3700 Houston, Texas 77002 (713) 546-5400

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

TABLE OF CONTENTS

 

		Page
Summary			1
Risk Factors			51
Cautionary Note Regarding Forward-Looking Statements			111
Use of Proceeds			114
Dividend Policy			116
Capitalization			117
Dilution			119
Management’s Discussion and Analysis of Financial Condition and Results of Operations			121
Business			142
Management			182
Executive Compensation			189
Corporate Reorganization			200
Security Ownership of Certain Beneficial Owners and Management			202
Certain Relationships and Related Party Transactions			204
Description of Shares			212
Our LLC Agreement			215
Shares Eligible for Future Sale			225
Material U.S. Federal Income Tax Considerations for Non-U.S. Holders			228
Certain ERISA Considerations			233
Underwriting			236
Legal Matters			244
Experts			244
Where You Can Find More Information			245
Glossary of Certain Industry Terms			A-1
Index to Financial Statements			F-i

 

 

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf or the information to which we have referred you. Neither we nor the underwriters have authorized anyone to provide you with information or to make any representations different from those contained in this prospectus and any free writing prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell Class A shares and seeking offers to buy Class A shares only under circumstances and in jurisdictions where such offers and sales are lawful. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Class A shares. Our business, liquidity position, financial condition, prospects or results of operations may have changed since the date of this prospectus.

This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. See the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

 

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BASIS OF PRESENTATION

This is the initial public offering of Class A shares of EagleRock. We were formed on December 1, 2025 by Lea & Eddy Holdings, LLC (“L&E”) and have not conducted and will not conduct any material business operations prior to the completion of the transactions described under “Corporate Reorganization” (such transactions, the “Corporate Reorganization”) other than certain activities related to this offering. Following the Corporate Reorganization, EagleRock will be a holding company, the sole material asset of which will consist of membership interests (“OpCo Units”) in EagleRock Land Operating, LLC, a Texas limited liability company (“OpCo”). EagleRock will also be the sole managing member of OpCo. As part of the Corporate Reorganization, (i) L&E will contribute all its subsidiaries, other than Hydrosource Logistics, LLC (“Hydrosource” or the “Excluded Assets”) to OpCo (the “L&E Contribution”), (ii) Double Eagle IV Midco, LLC (“Double Eagle”) will contribute DE IV Flow, LLC (“DE Flow”) to OpCo (the “DE Flow Contribution”) and (iii) the existing owners of the Shallow Valley Ranch (the “Shallow Valley Owners”) will contribute the entities that own Shallow Valley Ranch (“Shallow Valley”) to OpCo (the “Shallow Valley Contribution”).

The Corporate Reorganization is expected to be effected immediately prior to, and conditioned upon, the consummation of this offering. All steps comprising the Corporate Reorganization are expected to occur in connection with the closing of this offering and will be completed substantially concurrently with, but in any event prior to, the issuance of the Class A shares to the public shareholders. If this offering is not consummated, the Corporate Reorganization will not be completed. The sequencing and completion of the steps in the Corporate Reorganization may be adjusted for administrative or technical reasons, including the receipt of required consents and approvals, but such adjustments will not alter the substantive outcomes described under “Corporate Reorganization.”

Our organizational structure following the Corporate Reorganization will allow us to retain a direct equity ownership in OpCo, which will be classified as a partnership for U.S. federal income tax purposes following the offering. Investors in this offering will, by contrast, hold a direct economic and voting ownership interest in us in the form of Class A shares, and an indirect ownership interest in OpCo through our ownership of OpCo Units. Although we were formed as a limited liability company, we have elected to be taxed as a corporation for U.S. federal income tax purposes.

Pursuant to our LLC Agreement and the OpCo LLC Agreement (both, as defined herein), our capital structure and the capital structure of OpCo will generally replicate one another and will provide for customary antidilution mechanisms in order to maintain the one-for-one exchange ratio between the OpCo Units and our Class A shares. In connection with the Corporate Reorganization and this offering, each holder of OpCo Units (other than EagleRock) will receive one Class B share representing a non-economic voting limited liability company interest in us for each OpCo Unit that it holds. Accordingly, holders of the OpCo Units will have a number of votes in us equal to the aggregate number of OpCo Units that they hold. Class B shares cannot be transferred except in connection with a permitted transfer of a corresponding number of OpCo Units. Following this offering, under the OpCo LLC Agreement, each holder of OpCo Units (other than EagleRock) will, subject to certain limitations, have the right to redeem its OpCo Units (together with the cancellation of a corresponding number of Class B shares) for the same number of Class A shares, as described in more detail under “Summary—Redemption Right.” Holders of Class A shares and Class B shares will vote together as a single class on all matters presented to our shareholders for their vote or approval, except as otherwise required by applicable law or by our LLC Agreement.

For additional information, please see “Corporate Reorganization” and “Certain Relationships and Related Party Transactions—OpCo LLC Agreement.”

Throughout this prospectus, we present operational and financial information regarding the business of OpCo. This information is generally presented on an enterprise-wide basis. However, the

 

ii

Class A shares to be issued to the public shareholders in this offering will initially represent a minority economic interest in OpCo. We expect that our Existing Owners and the TCW Entities will initially hold a majority of the economic interest in OpCo, as non-controlling interest holders, through their ownership of a majority of the OpCo Units and Class A shares outstanding immediately following the closing of this offering. Immediately following this offering, our Existing Owners and the TCW Entities will directly control us and, as a result, will indirectly control OpCo through their ownership of Class B shares representing greater than a majority of our outstanding equity interests. Because the Class A shares issued in this offering will initially indirectly represent a minority economic interest in OpCo, prospective investors should therefore evaluate performance metrics and financial information in this prospectus accordingly. To the extent that OpCo Units (along with a corresponding number of our Class B shares) are redeemed for our Class A shares (or, at our election, for cash) over time, the relative economic interest of EagleRock and our public shareholders in OpCo’s economic results will increase relative to that of our Existing Owners and the TCW Entities.

Financial and Operating Data Presentation

References to “EagleRock,” “we,” “our,” “us” or like terms refer collectively to (i) L&E (other than the Excluded Assets), Shallow Valley and DE Flow, together with their consolidated subsidiaries, before the completion of the Corporate Reorganization and (ii) EagleRock Land, LLC and its consolidated subsidiaries, including L&E, Shallow Valley and DE Flow, as of and following the completion of the Corporate Reorganization. Unless otherwise indicated, the historical financial information presented in this prospectus is that of L&E, our predecessor for accounting purposes.

In certain instances in this prospectus, we present financial data on a “pro forma” or “pro forma, as adjusted” basis, as applicable. As used herein and as applicable based on the periods presented, unless otherwise indicated, these references have the following meanings:

 

•

the term “pro forma” refers to the historical financial data of our predecessor, as adjusted to give effect to (i) L&E’s acquisition of the equity interests of Accelerated Water Resources, LLC on April 14, 2025 (such entity, “Accelerated” and such acquisition, the “Accelerated Acquisition”), (ii) the exclusion of the Excluded Assets that are not being conveyed to EagleRock, (iii) the Shallow Valley Contribution and (iv) the DE Flow Contribution (collectively, the “Pro Forma Transactions”); and

 

•

the term “pro forma, as adjusted” refers to the historical financial data of our predecessor, as adjusted to give effect to (i) the Pro Forma Transactions, (ii) the Up-C Reorganization (as defined herein) and (iii) this offering and the application of the net proceeds therefrom as described in “Use of Proceeds” (collectively, the “Pro Forma As Adjusted Transactions”).

Unless otherwise indicated, (i) pro forma financial data for the year ended December 31, 2025 gives effect to the Pro Forma Transactions as if each transaction had been consummated on January 1, 2025, and (ii) pro forma, as adjusted financial data for the year ended December 31, 2025 gives effect to the Pro Forma As Adjusted Transactions as if such transactions had been consummated on January 1, 2025, except that the pro forma and pro forma, as adjusted balance sheet data has not been adjusted for the Accelerated Acquisition because the predecessor balance sheet as of December 31, 2025 fully reflects the Accelerated Acquisition, which was completed on April 14, 2025. Pro forma and pro forma, as adjusted financial data contain certain reclassification adjustments to conform the historical L&E, Accelerated, Shallow Valley and DE Flow financial statement presentation to the Company’s financial statement presentation, as applicable. The pro forma and pro forma, as adjusted financial data also give effect to (i) the exclusion of the Excluded Assets and the entry into the Hydrosource Recycling Agreement (as defined herein) in connection with the L&E Contribution and (ii) the entry into the DE Flow WSMA (as defined herein) in connection with the DE Flow Contribution.

 

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The pro forma and pro forma, as adjusted financial data is presented for illustrative purposes only and should not be relied upon as an indication of the financial condition or the operating results that would have been achieved if the Pro Forma Transactions or the Pro Forma As Adjusted Transactions had taken place on the specified dates. In addition, future results may vary significantly from the results reflected in such pro forma and pro forma, as adjusted data and should not be relied on as an indication of future results. Please refer to our Unaudited Pro Forma Condensed Consolidated Financial Statements and the related notes thereto included elsewhere in this prospectus for additional information.

Unless otherwise indicated, all operational data in this prospectus is presented on a pro forma basis.

 

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INDUSTRY DATA

Certain market and industry data and other statistical information used throughout this prospectus have been obtained from Enverus, an independent industry source, as well as from research reports prepared for other purposes. Some market data and statistical information contained in this prospectus are also based on management’s estimates and calculations, which are derived from our review and interpretation of publicly available industry publications, our internal research and our knowledge of the markets in which we currently operate and, as of the date of this prospectus, anticipate operating in the future. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this prospectus. While we are not aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this prospectus.

TRADEMARKS AND TRADE NAMES

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and does not, imply a relationship with us or endorsement or sponsorship by or of us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ^®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner or licensor to these trademarks, service marks and trade names.

 

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RISK FACTORS

Investing in our Class A shares involves a significant degree of risk. The risks described below as well as all other information in this prospectus, including the historical and pro forma financial statements and the notes thereto and the matters addressed under the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Cautionary Note Regarding Forward-Looking Statements,” should be considered carefully before deciding to invest in our Class A shares. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also materially affect our business. The occurrence of any of the following risks or additional risks and uncertainties that are currently deemed immaterial or unknown could have a material and adverse effect on our business, financial condition, liquidity, results of operations, cash flows and prospects. In such an event, the trading price of our Class A shares could decline, and you may lose all or part of your investment.

Risks Related to Our Business and Operations

Our revenues are substantially dependent on ongoing oil and natural gas exploration, development and production activity on or around our land. If E&P companies do not maintain drilling, completion and production activities on or around our land, the demand for the use of our land and resources, as well as the royalties we receive from activities on our land, could be reduced, which could have a material adverse effect on our results of operations, cash flows and financial position.

We are not an E&P company and have limited physical operations on our land. As a result, we have limited ability to influence or control the operation or future development of, or on, our properties. We are dependent on our customers to develop our properties, construct infrastructure and commence other operations on and around our land. Revenue is tied to E&P development intensity and midstream connectivity; delays in drilling, completions, takeaway or recycling demand can reduce volumes and fees. Contract renewals or new surface/easement grants may be delayed or repriced, impacting continuity and economics. We therefore remain exposed to our customers’ development pacing and capital allocation decisions, which we do not control.

The willingness and ability of companies to continue operations and development activities on and around our land is dependent on a variety of factors that are outside of their and our control, including:

 

•

the demand for and supply of oil, natural gas and NGLs;

 

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prevailing oil, natural gas and NGL prices, and expectations regarding future oil, natural gas and NGL prices;

 

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capital expenditures, including costs required for drilling, completion and production activities;

 

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the ability to access, and cost of, capital;

 

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the availability of supplies and resources, including suitable drilling equipment, production and transportation infrastructure and qualified operating personnel;

 

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consolidation in the oil and gas industry, which may result in lower overall drilling and completion activity;

 

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the producers’ expected return on investment on projects and in wells drilled on or around our land as compared to opportunities in other areas;

 

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the terms of our agreements, which often include renewal and termination provisions that could be exercised adversely, reducing revenues, interrupting operations or increasing costs;

 

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•

trade policies of domestic and foreign governments, including the imposition of tariffs and other levies on cross-border movement of goods and services; and

 

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regulatory developments, including, but not limited to, permitting timelines and outcomes for surface-disturbing activities, air and water authorizations and produced-water handling and disposal.

Many of our SUAs require our customers to use resources from our land, such as caliche, water and sand, for their operations on our land, for which we receive fees. As such, we are substantially dependent on our customers’ operations and/or drilling, completion and production activities by companies on or around our acreage. Similarly, the services our operating partners provide from which we earn royalties and fees are substantially dependent on those same activities. If companies do not maintain such activities on or around our land, their demand for the use of our land and resources and our operating partners’ services will decline, negatively impacting our results of operations, cash flows and financial position. In addition, customers may satisfy obligations through recycling or alternative handling pathways that reduce demand for water or shift produced-water flows away from higher-royalty configurations on our land.

Demand for the use of our land and resources, as well as the services provided by our operating partners, depends substantially on capital spending by producers to construct and maintain infrastructure on and around our acreage and explore for, develop and produce oil, natural gas and NGLs in the area. These expenditures are generally dependent on such producers’ overall financial position, capital allocation priorities and ability to access capital, and their views of future demand for, and prices of, oil, natural gas and NGLs. Volatility in oil, natural gas or NGLs prices (or the perception that oil, natural gas or NGLs prices will decrease) affects such producers’ capital expenditures and willingness to pursue development activities. This, in turn, could lead to lower demand for the use of our land and resources or our operating partners’ services, delays in payment of, or nonpayment of, amounts that are owed to us and cause lower rates and lower utilization of our land. As a result, a significant decrease in the price of oil, natural gas and NGLs or decrease in levels of production of oil, natural gas and NGLs on and around our land could adversely affect our results of operations, cash flows and financial position. Moreover, our agreements generally allow customers discretion over the pace and scope of development, which may accentuate these impacts during periods of commodity price weakness. For additional discussion of commodity price exposure, see “—The willingness of companies to engage in drilling, completion and production activities on and around our land is substantially influenced by the market prices of oil, natural gas and NGLs.”

For the year ended December 31, 2025, on an actual basis, we received revenue from approximately 75 customers, and our top ten customers represented approximately 77.2% of our total revenues. For the year ended December 31, 2025, on a pro forma basis, we received revenue from approximately 115 customers, and our top ten customers represented approximately 74.5% of our total revenues. While we expect these revenue streams to be recurring, our contracts with our significant customers, which represent a large portion of our revenues, often are structured as surface-use and royalty arrangements; however, many of these contracts do not include minimum commitments for land use or water volumes, and where such provisions exist, they may be subject to caps, carve-outs or other limitations. In particular, our Hydrosource Recycling Agreement will include a minimum annual royalty, and also entitle us to per-barrel royalties on certain volumes Hydrosource sells across the Permian Basin, which mitigates, but does not eliminate, volume risk under that agreement. In addition, certain Midland Basin water-infrastructure revenues are supported by long-term acreage dedications and minimum-volume commitments, which will include a minimum annual royalty under our DE Flow WSMA with DEF Operating, an affiliate of Double Eagle. These features mitigate, but do not eliminate, volume risk, and actual activity levels and volumes on or around our acreage will continue to drive our revenues.

 

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As a result, our revenues are dependent on ongoing demand from these customers, which may decrease due to factors beyond our control. Our producers make all decisions as to investments in, and production from, their wells, and our revenues are dependent upon decisions made by such producers, among other factors. For example, we cannot control whether a producer chooses to develop a property or the success of drilling and development activities, which depend on a number of factors under the control of such producer. There can be no assurance that such producers will take actions or make decisions that will be beneficial to us, which could result in adverse effects on our results of operations, cash flows and financial position.

We also depend on operating partners to construct and operate certain water management and related systems on or adjacent to our acreage, including Hydrosource in the Delaware and Midland Basins and DEF Operating in portions of the Midland Basin, and any reduction in activity by their upstream customers, failure to obtain or maintain permits or inability to access ROWs and pore space, could reduce volumes handled on or around our land and adversely affect the royalties and fees we receive.

Although many of our SUAs include long tenors, exclusivity for certain resources and specified fee schedules for surface uses, development pacing, commodity-driven spending, regulatory changes and permitting outcomes can still materially impact customer activity and the timing and level of payments to us. In Texas and New Mexico, state regulators have, at times, limited produced-water handling through Seismic Response Area (“SRA”) measures and permit actions, and future actions could disrupt produced-water handling on or near our land and reduce customer activity levels. Although our acreage is not currently included in any SRA, there can be no assurance this will remain the case. More broadly, permits for produced-water handling and disposal, air emissions, dredge and fill activities and surface-disturbing construction are subject to heightened scrutiny, evolving technical standards and more frequent third-party challenges, which can extend timelines, increase costs or result in permit denials or revocations after issuance. Limitations on obtaining or renewing necessary permits or accessing suitable pore space and rights-of-way near our acreage could divert volumes to areas where we do not earn royalties and materially and adversely affect our results of operations, cash flows and financial position.

The willingness of companies to engage in drilling, completion and production activities on and around our land is substantially influenced by the market prices of oil, natural gas and NGLs, which are highly volatile due to factors beyond our control. A substantial or extended decline in commodity prices may adversely affect our business, financial condition, results of operations and cash flows.

Historically, the markets for oil, natural gas and NGLs have been volatile, and they are likely to continue to be volatile. For example, political instability or armed conflicts in oil and gas producing regions have contributed to significant increases and volatility in the price for oil, natural gas and NGLs. Wide fluctuations in oil, natural gas and NGLs prices may result from relatively minor changes in the supply of or demand for oil, natural gas and NGLs, market uncertainty and other factors that are beyond our and our customers’ control, including:

 

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worldwide and regional economic conditions, including the potential for a recession in the U.S. or worldwide, elevated interest rates and associated policies of the U.S. Federal Reserve Board (“Federal Reserve”);

 

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the supply and demand for oil, natural gas and NGLs, including a potential increase in Venezuelan oil supply and any related impact on global oil prices and domestic oil production;

 

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changes in seasonal temperatures, including the number of heating degree days during winter months and cooling degree days during summer months;

 

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U.S. federal, state and local and foreign governmental regulation, including U.S. and international trade policies and any resultant tariffs, and taxes;

 

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supply chain disruptions;

 

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the level of oil, natural gas and NGLs exploration, development and production activities;

 

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the level of oil, natural gas and NGLs inventories;

 

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prevailing prices, and expectations regarding future prices, on local price indexes in the areas near our acreage;

 

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the proximity, capacity, cost and availability of gathering and transportation facilities;

 

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localized and global supply and demand fundamentals and transportation availability;

 

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the cost of exploring for, developing, producing and transporting oil, natural gas and NGLs;

 

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weather conditions, such as severe storms, earthquakes and flooding, and other natural disasters;

 

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technological advances affecting energy consumption, including those related to new and emerging technologies;

 

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the development, price and availability of alternative fuels;

 

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speculative trading in oil, natural gas and NGLs derivative contracts;

 

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increased end-user conservation;

 

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political and economic conditions in or affecting oil and gas producing regions or countries;

 

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actions of the Organization of Petroleum Exporting Countries (“OPEC” and collectively with its allies, “OPEC+”), including the ability and willingness of the members of OPEC+ and other exporting nations to agree to and maintain oil price and production controls, including any anticipated increases in supply;

 

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expectations about future commodity prices; and

 

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the possibility of terrorist or physical, electronic and cybersecurity breaches and the consequences of any such attacks or breaches.

These factors and the volatility of the energy markets make it extremely difficult to predict future oil, natural gas and NGLs price movements with any certainty. From the beginning of 2022 through December of 2025, NYMEX WTI ranged from $55.44 to $123.64 per Bbl, and the NYMEX Henry Hub price of natural gas has ranged from $1.21 to $13.20 per MMBtu. The war in Ukraine, the war between the U.S. and Israel against Iran, the U.S. engagement in Venezuela, elevated interest rates, global supply chain disruptions, concerns about a potential economic downturn or recession, recent measures to combat persistent inflation and actions taken by OPEC+ all continue to contribute to economic and oil and natural gas price volatility. In particular, crude oil prices have risen significantly during the spring of 2026 as a result of concerns over supply-related constraints resulting from the war in the Middle East between the U.S., Israel and Iran. As a result of this conflict, significant production shut-ins have occurred and global shipping of crude oil and NGLs has been disrupted. However, the duration of that conflict and the longer term impact on crude oil prices remains uncertain. If the prices of oil, natural gas and NGLs decline, our operations and financial condition may be materially and adversely affected through a reduction in the use of our land and its resources and/or our operating partners’ services. Moreover, while U.S. natural gas prices are correlated with global oil price movements, they are also affected by local weather, transportation and consumption patterns. Further, NGLs are made up of ethane, propane, isobutane, normal butane and natural gasoline, all of which have different uses and different pricing characteristics, which adds further volatility to the pricing of NGLs.

 

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We cannot reasonably predict whether production levels will remain at current levels or the impact the full extent of the events above may have on our industry and our business. In addition, oil, natural gas and NGLs prices may reduce the amount of oil, natural gas and NGLs that can be produced economically by operators on or around our land, which may reduce their willingness to develop our properties and/or use our or our operating partners’ services. Operators on and around our land could also determine during periods of low commodity prices to shut in or curtail production from wells on our properties. In addition, they could determine during periods of low commodity prices to plug and abandon marginal wells that otherwise may have been allowed to continue to produce for a longer period under conditions of higher prices. Specifically, they may abandon any well if they reasonably believe that the well can no longer produce oil, natural gas and NGLs in commercially paying quantities. Other significant factors that are likely to continue to affect commodity prices in future periods include, but are not limited to, the effect of U.S. energy, monetary and trade policies, U.S. and global economic conditions and political developments, including the current U.S. administration’s trade, energy and environmental policies, all of which are beyond our control. Our business may also be adversely impacted by any future government rule, regulation or order that may impose production limits, as well as pipeline capacity, storage constraints and transportation delays.

Our business is difficult to evaluate because we have a limited operating history.

Although our predecessor commenced operations in early 2024, we were formed in December 2025 to facilitate this offering and certain transactions related thereto, and our business going forward will be a combination of newly acquired assets from multiple sources. In addition, our predecessor consummated two significant acquisitions since its formation—the Desert Ram Acquisition and the Accelerated Acquisition. As a result, our prior operating history and historical financial statements may not be a reliable basis for evaluating our business prospects or the future value of our Class A shares and may make it difficult to assess our ability to operate profitably. Our future results will be dependent on, among other things, a number of factors and trends discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and elsewhere in this prospectus and the risks discussed elsewhere in this “Risk Factors” section, as well as our ability to execute our business model. Our business model may not be successful, and if unsuccessful, we may be unable to modify it in a timely and successful manner.

Because of our limited operating history, our business model and the attractiveness of our land and resources 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.

In addition, we may encounter risks, liabilities and difficulties experienced by companies whose performance is dependent upon newly acquired assets, such as unforeseen liabilities or failing to integrate, or realizing the expected benefits of, such assets. As a result of the foregoing, we may be less successful in achieving a consistent revenue base capable of generating cash flows from operations compared with a company that has a longer operating history. In addition, we may be less equipped to identify and address risks and hazards in the conduct of our business than those companies that have longer operating histories.

Moreover, our results and cash flows will depend on the development decisions and operating performance of producers and operating partners on and around our acreage, over which we have limited control, and which are affected by factors beyond our control, including commodity price volatility, access to capital, permitting and regulatory developments, supply chain constraints and labor availability. In the Midland Basin, for instance, our produced water handling revenues are supported by long-term arrangements on the DE Flow System with peak handling capacity of approximately 400 MBbls/d; however, producer activity levels, availability of pore space and regulatory constraints on

 

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injection and recycling could materially affect throughput and related royalties and fees. Similarly, our surface-use and resource revenues on our Delaware Basin acreage are influenced by producer drilling, completion and infrastructure activities, which have historically fluctuated with macroeconomic conditions and commodity pricing.

Future land acquisitions would expose us to risks associated with acquisitions and the commercialization of additional acreage.

We may pursue opportunistic future land acquisitions that we expect to complement or expand our current land position. We may not be able to identify attractive acquisition opportunities, and even if we do so, we may not be able to complete the acquisition on commercially acceptable terms, or at all. No assurance can be given that we will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms, or at all, or successfully acquire such identified acreage.

Additionally, we may potentially pursue selective acquisitions from the Existing Owners in the future. For example, Hydrosource recently acquired approximately 50,000 surface acres in Lea County, New Mexico that is proximate to our existing land holdings in the Delaware Basin and we may consider acquiring such acreage from Hydrosource in the future. However, these properties have not been offered to us by Hydrosource, no negotiations have occurred and no agreement currently exists, and there can be no assurance that any such agreement will be reached in the future or that we would have the capital necessary to acquire these assets in the event they were offered to us. Additionally, if any acquisition from the Existing Owners were to be pursued in the future, such acquisition would require approval from a conflicts committee of our board of directors comprised solely of independent and disinterested directors.

The process of integrating acquired acreage may involve unforeseen risks, liabilities and difficulties and may require a disproportionate amount of our managerial and financial resources. Our failure to realize the anticipated benefits of our acquisitions could have a material and adverse effect on our results of operations, cash flows and financial position. The successful acquisition and integration of acreage requires an assessment of several factors, including:

 

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the availability of water and the suitability of the land for produced water handling;

 

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proximity to recoverable oil, natural gas and NGLs reserves and the level of drilling, completion and production operations of the target acreage;

 

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presence of minable sand;

 

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future oil, natural gas and NGLs prices and their applicable differentials;

 

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potential environmental and other liabilities;

 

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any restrictive covenants or other use restrictions that would prohibit or restrict the ability to engage in certain activities on the target land; and

 

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regulatory, permitting and other similar matters.

The accuracy of these assessments is inherently uncertain. Although we will perform a review of the subject acreage that we believe to be generally consistent with industry practices, the accuracy of these assessments is inherently uncertain and may not reveal all existing or potential problems or fully assess their deficiencies and capabilities. Inspections may not always be performed on the totality of such acreage, and environmental problems are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems.

 

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Even if we consummate acquisitions that we believe will increase our revenues and cash generated from operations, such transactions could nonetheless reduce our Free Cash Flow and cash flow per share, at least in the near term, and may limit our ability to return capital to shareholders or fund organic growth on our acreage. Any acquisition involves potential risks, including, among other things: the validity of our assumptions regarding surface-related revenues and royalties, including fees and rates under our SUAs, ROWs and easements, and water sourcing, produced water handling, recycling and disposal activities; a decrease in our liquidity from deploying a significant portion of cash generated from operations or borrowing capacity to finance acquisitions; a significant increase in our interest expense or financial leverage if we incur debt to fund acquisitions; the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which any indemnity we receive is inadequate; inaccurate assumptions about our overall cost of equity or debt; our ability to obtain satisfactory title to, or adequately defend, the surface estates, ROWs, easements and pore space rights we seek to acquire; constraints on our ability to integrate newly acquired acreage into our commercial framework with operating partners; challenges in hiring, training or retaining qualified personnel to manage and operate a larger platform; and other significant changes, such as impairments of acquired assets, goodwill or other intangibles, asset devaluation or restructuring charges.

Because a significant portion of our future revenue growth is expected to be derived from our operating partners, any development that materially and adversely affects their business, operations or financial condition, including insolvency or bankruptcy proceedings, inability to obtain sufficient financing, mandated regulatory curtailments or suspensions or failure to perform under our agreements, could have a material adverse impact on us.

Our operating partners are expected to play an important role in our financial performance over the long term, and we are indirectly subject to the business risks they face. As a result, any development that materially and adversely affects an operating partner’s business, operations or financial condition, including reductions in upstream customer activity, inability to access capital on acceptable terms, or at all, regulatory delays or denials, loss of key permits, labor or supply chain constraints or counterparty defaults, could reduce volumes handled on or near our acreage, diminish demand for the use of our land and resources, delay or reduce payments owed to us and otherwise have a material adverse impact on our results of operations, cash flows and financial position. Because oil and natural gas wells exhibit declining production profiles, surface activity and associated fees tied to those wells will naturally decline over time, requiring us to proactively backfill demand by repositioning corridors and other surface rights for alternative and non-traditional uses and by structuring our agreements to allow for multiple uses over the life of the acreage.

In particular, we depend on operating partners to construct and operate water management and related systems on or adjacent to our acreage, and any reduction in activity by their upstream customers, failure to obtain or maintain required permits, or inability to access ROWs and pore space, could reduce throughput on such systems and adversely affect the royalties and fees we receive. As wells mature, are shut-in or plugged and abandoned, portions of our land may transition from drilling and completion activities to reclamation or repurposing, which can change the mix and timing of royalties and fees and necessitate incremental remediation or permitting before reuse. Although many of our surface use agreements include long terms, elements of exclusivity and specified fee schedules for surface uses, development pacing, commodity-driven spending, regulatory changes and permitting outcomes can materially impact customer activity and the timing and level of payments to us.

Our operating partners do not own all of the land on which their infrastructure is located, and certain portions of such infrastructure are subject to third-party leases, ROWs and easements. If an operating partner were to lose these rights or be required to relocate its infrastructure, our business could be materially and adversely affected through service interruptions or higher costs that reduce activity levels or delay projects on or around our land. In addition, if our operating partners are unable

 

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to enter into favorable commercial arrangements, obtain sufficient financing, or to obtain necessary regulatory and land use approvals on favorable terms and timelines, they may be unable to construct, expand or operate assets as anticipated, or at all, which could negatively affect our results of operations, cash flows and financial position.

Further, produced water handling and related activities depend on sufficient and reliable access to injection capacity and pore space, as well as regulatory approvals that are subject to change. Constraints in pore space availability, reservoir over-pressurization, seismicity-related curtailments, or new restrictions on injection, recycling or the cross-border movement of produced water, could limit our operating partners’ ability to handle produced water volumes, in turn reducing activity on or around our land and adversely affecting our revenues tied to such activity. These risks may be compounded by commodity price volatility and consolidation among upstream producers, which can alter development plans in our areas and materially affect throughput and surface utilization underlying our fee and royalty streams. In addition, temporary or permanent moratoria, suspensions or other regulatory actions affecting injection or produced water recycling—including induced-seismicity response measures or changes or revocations to existing permits or changes to future permitting regimes—could further constrain throughput and materially affect the timing and level of our fee and royalty streams.

Although our contracts with operating partners and customers may include features such as acreage dedications, specified fee schedules, and minimum-royalty commitments, these provisions do not eliminate the volume, timing and counterparty risks associated with dependence on operating partners and their and our customer base, and contractual protections may include caps, carve-outs or other limitations. Certain contractual protections may also be limited by bankruptcy or insolvency laws, and counterparties may seek to reject, renegotiate or fail to assume our agreements in such proceedings, which could diminish expected volumes and payments notwithstanding such protections. In addition, under a put option agreement between Double Eagle and Hydrosource, Double Eagle has the right to sell, and Hydrosource has the obligation to purchase, DEF Operating if Double Eagle undergoes certain change of control events or at any time following five years from the date of this offering. If Double Eagle exercises such put right, it would cease to be one of our operating partners and we would lose the benefits of that relationship, and Hydrosource, our other operating partner, would become the owner of DEF Operating, which is the party to the DE Flow WSMA and the minimum royalty obligation thereunder. As a result, sustained reductions in operating partner activity, loss of land access rights, inability to obtain or maintain permits or sufficient financing, regulatory or geologic constraints or other adverse developments affecting our operating partners could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We rely on a small number of key individuals whose absence or loss could adversely affect our business, and difficulty attracting and retaining experienced personnel and qualified directors could reduce our competitiveness and prospects for future success.

The successful operation and growth of our business depends to a large extent on a small number of key individuals to whom many integral responsibilities within our business have been assigned. We rely on our key personnel for their knowledge of the energy industry, relationships within the industry and experience in operating a business in our areas of operation. In particular, we depend on the continued services of our senior management team, including our Chief Executive Officer, Greg Pipkin Jr., our President and Chief Financial Officer, Neal H. Shah, and our General Counsel, Robert W. Hunt Jr. The loss of the services of one or more of these key personnel, directors or management team members, including Mr. Pipkin, Mr. Shah or Mr. Hunt, and the inability to recruit or retain additional key personnel, could have an adverse effect on our business. Further, we do not currently have a succession plan for the replacement of, and do not maintain “key-person” life insurance policies on, such key personnel.

 

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In addition, our business and the success thereof is also dependent, in part, on our ability to attract and retain qualified personnel. Acquiring and keeping these personnel could prove more difficult or cost substantially more than estimated due to competition within the broader energy industry. Other companies may be able to offer better compensation and benefits packages to attract and retain such personnel. If we cannot retain experienced personnel or attract additional experienced personnel, our ability to compete in our industry could be harmed, which could have a material adverse effect on our results of operations, cash flows and financial position.

Our acreage is located in the Permian Basin, making us vulnerable to risks associated with geographic concentration in a single geographic area.

Our acreage is located in the Permian Basin in Texas and New Mexico, making us vulnerable to risks associated with geographic concentration in that basin. In particular, we and our customers may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from oil and natural gas wells in this area, availability of equipment, facilities, personnel or services, market limitations, governmental regulation and political activities, processing or transportation capacity constraints, natural disasters, adverse weather conditions, water shortages or other drought related conditions or interruption of the processing or transportation of produced water, oil, natural gas and NGLs. For example, state regulators in Texas and New Mexico have, at times, limited produced-water handling through SRA measures and permit actions (including the NMOCD’s July 2024 administrative cancellation of pending UIC Class II applications within the 10-mile County Line SRA), and similar actions in the future could disrupt produced-water handling on or near our land and reduce customer activity levels. Although our acreage is not currently included in any SRA, there can be no assurance that this will remain the case. These types of regional regulatory responses-and the underlying induced-seismicity concerns they seek to address-concentrate risk for operators within the Permian Basin relative to other basins.

In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas such as the Midland Basin and Delaware Basin, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions. For instance, producer activity on and around our Midland Basin surface position ties directly to water infrastructure throughput contracts and any slowdown in development pacing, access to pore space, or permitting outcomes could reduce volumes that ultimately flow across our land and impact associated royalties and fees. In the Delaware Basin, localized seismicity management measures and differences between Texas and New Mexico produced-water permitting regimes can similarly affect development cadence on and around our surface position. Additionally, our water sales and other resource royalties may be adversely affected by risks associated with our geographic concentration, including the presence of a limited number of potential customers on or near our land, competition with adjacent landowners to provide an attractive development site for such resources, particularly if such landowners are closer to the location of oil and natural gas development activity, and legislation or regulatory initiatives limiting the utilization or transportation of water and other resources in the Permian Basin. In addition, our Hydrosource Recycling Agreement will include per-barrel royalties tied to recycled-water sales (with minimum annual volumes), such that any region-specific slowdowns or restrictions in the Permian Basin may directly impact our royalty receipts even when activity occurs off-ranch.

Our operations depend upon access to available pore space in subsurface geologic formations for AGI wells and disposal 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.

Our customers handle produced water generated during oil and natural gas operations by constructing produced water handling facilities and injecting such produced water into porous

 

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subsurface geologic formations. We have also experienced increased demand for our pore space for AGI wells, with the first AGI well contracted and projected to commence revenue activities within the next 12 months. The amount of subsurface pore space that is capable of permanently storing injected produced water or acid gas and carbon dioxide is finite. As third parties inject produced water or acid gas and carbon dioxide on our land, we may exhaust the geologic or technical limits of the subsurface strata. In addition, produced-water injection in parts of the Permian Basin has been subject to SRA measures and targeted permit actions, which can reduce or suspend injection in affected areas. For example, on July 11, 2024, the NMOCD administratively canceled 75 pending Class II permit applications within the 10-mile County Line SRA due to seismicity concerns. Although our acreage is not currently within an SRA, similar actions in the future could constrain injection alternatives near our land and heighten competition for available pore space.

Any loss of pore space or injection capacity on our land for technical, geological or regulatory reasons could require our customers to spend significant time and capital to locate, apply for, permit, drill, complete and place into service new produced water handling facilities and to build pipeline infrastructure to transport produced water to such new facilities. Our customers may also look for pore space on land we do not own or control. Permits for new produced water handling facilities could be challenged for a variety of reasons by our customers’ competitors, oil and natural gas producers, landowners or non-governmental organizations. Such regulatory challenges could be successful and prevent our customers from being able to secure access to additional pore space on our land. By way of example, Texas regulators have previously suspended or declined to issue certain deep-zone disposal permits within designated SRAs in response to seismicity, and New Mexico protocols require rate limits and other curtailments after qualifying seismic events; outcomes that can delay or displace new injection capacity even where subsurface pore space exists. While our SWD footprint is concentrated on Midland Basin acreage in Texas, where permitting has generally been more favorable and seismicity lower than in New Mexico, pore-space and pressure limitations still ultimately cap injection capacity and may necessitate recycling or longer-haul solutions if disposal is constrained.

Identified drilling locations, which are scheduled out over many years, are susceptible to uncertainties that could materially alter the occurrence or timing of their drilling.

As of December 22, 2025, operators for the acreage associated with our properties have advised us that they have identified more than 3,144 gross horizontal drilling locations across our acreage. These drilling locations represent a significant part of our growth strategy. The ability of operators on our properties to drill and develop identified potential drilling locations will depend on a number of factors, including the availability of capital, seasonal conditions, regulatory changes and approvals, negotiation of agreements with third parties, commodity prices, costs, the generation of additional seismic or geological information, the availability of drilling rigs, drilling results, construction of infrastructure, inclement weather and lease expirations.

Further, identified potential drilling locations are in various stages of evaluation, ranging from locations that are ready to drill to locations that will require substantial additional analysis of data. We will not be able to predict in advance of drilling and testing whether any particular drilling location will yield production in sufficient quantities for operators to recover drilling or completion costs or to be economically viable. Even if sufficient amounts of oil or natural gas reserves exist, the potentially productive hydrocarbon bearing formation may be damaged or mechanical difficulties may develop while drilling or completing the well, possibly resulting in a reduction in production from the well or abandonment of the well. If operators drill dry holes in our current and future drilling locations, our business may be materially harmed. We cannot assure you that the analogies drawn from available data from other wells, more fully explored locations or producing fields will be applicable to our drilling locations. Further, initial production rates reported by us or our operators in our areas of operations may not be indicative of future or long-term production rates.

 

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Because of these uncertainties, we do not know if the potential drilling locations identified on our acreage will ever be drilled or if oil or natural gas reserves will be able to be produced from these or any other potential drilling locations, and we have little or no control over the timing of future drilling with respect to our acreage. As such, actual drilling activities with respect to our acreage may materially differ from those presently identified, which could adversely affect our business, financial condition, results of operations and cash available for distribution.

We may not be successful in pursuing additional commercial opportunities on our land from non-traditional energy production and other users.

One of our strategies is to expand the use of our land and sources of revenue beyond what is traditionally associated with oil and gas development. For example, we intend to pursue new potential revenue sources from wind and solar farm leases, battery storage and microgrids, behind the meter power generation, electric transmission lines, data centers, beneficial reuse, cryptocurrency mining and commercial real estate leases. We do not have experience developing many of these commercial opportunities and our efforts to do so may not be successful. We may not be able to correctly identify such commercial opportunities or may be unsuccessful in attracting industry participants to develop projects on our land or to use our resources. The rapidly evolving and competitive nature of many of the industries we are targeting for such development makes it difficult to evaluate the future prospects of these projects. In addition, we have limited insight into emerging trends that may adversely affect the development of such projects on our land, the use of our resources or otherwise, and many of these potential customers, if they were to materialize, would encounter the risks and difficulties frequently experienced by growing companies and project developers in rapidly changing industries, including unpredictable and volatile revenues, increased expenses, an uncertain regulatory environment, novel litigation and corresponding outcomes and changes in business conditions. The viability of this business strategy and the resulting demand for the use of our land and resources by such potential customers will be affected by many factors outside of our control and may not be successful.

A significant portion of our acreage is held by us through leases from the Bureau of Land Management and the State of New Mexico. If we are unable to renew these leases in the future on similar or favorable terms, or at all, or if the activities we and our customers are permitted to conduct on our lands are materially changed or limited, our business and financial condition could be materially and adversely impacted.

As of December 31, 2025, a substantial portion of our land portfolio was held through leases with the Bureau of Land Management (the “BLM”) and the State of New Mexico. As of that date, we owned or controlled approximately 236,000 acres across Texas and New Mexico, including approximately 194,000 acres in the Delaware Basin, of which approximately 157,000 acres are controlled through grazing and mining leases with the State of New Mexico and the BLM, and approximately 37,000 acres are fee acreage. Our leasehold interests on New Mexico state lands are generally grazing and mining leases that grant us certain rights with respect to the surface for initial lease periods ranging from one to five years from inception. Our leasehold interests on federal lands with the BLM are generally grazing leases that grant us rights with respect to the surface for initial lease periods of approximately 10 years from inception. We anticipate renewing each of our existing leases, and any future additional leases, with the BLM and the State of New Mexico in accordance with the terms of each respective instrument; however, there can be no assurance we will be successful in procuring such renewals at all or on attractive terms. These leases do not convey permanent property rights and may be modified, repriced, suspended or not renewed by the issuing agencies based on changes to environmental standards, land use plans or other regulatory criteria.

As the agricultural lessee, we have leased possession and use of the grazing interest of the lands that are subject to the lease. When the surface is excavated or occupied by a surface use implemented

 

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by a third party, we receive payments to compensate us for the impairment of value and costs to repair the physical damage. Additionally, under New Mexico law, the holder of an easement or right-of-way is required to compensate the lessee for the reasonable value of any measurable damage incurred upon improvements or other property belonging to the lessee. These leases form the basis through which we are able to generate fees from our customers that operate on or use our land, as well as generate revenues from the sale of resources present on the acreage we control. On renewal, agencies may impose additional environmental mitigation measures, increase lease rental rates, restrict the timing, area or intensity of permissible activities or alter land use stipulations, any of which could increase our costs or constrain operations. Administrative appeals or litigation challenging agency decisions regarding our leases, rights of way or related approvals could delay planned activities, create uncertainty and result in higher legal and compliance costs. While New Mexico law requires holders of easements or rights of way to compensate the lessee for the reasonable value of measurable damage to the lessee’s improvements or other property, any such compensation may be uncertain, delayed or insufficient to offset lost surface use fees, royalties or broader impacts to our operations.

Our ability to monetize our lands also depends on our customers obtaining and maintaining rights of way and easements, constructing and operating infrastructure and purchasing resources such as water and caliche on or across our acreage. Material restrictions or increased costs on renewal could reduce surface use fees, resource sales and volumetric or other royalty revenues and could require us or our customers to seek alternative locations or permits, increasing costs and delaying projects.

Our surface position is concentrated in the Delaware Basin in southeastern New Mexico, and our leased state and federal tracts are intermingled with our fee acreage and adjacent to third party operations. Constraints or loss of access on leased tracts could reduce utilization of adjacent fee tracts, limit our ability to offer contiguous corridors for rights of way and diminish the value or throughput of infrastructure located on or connected to our lands.

Renewal, modification or assignment of our leases may depend on evolving land use management plans and environmental standards. Changes in political priorities or public policy, including habitat conservation initiatives, drought management measures or greenhouse gas reduction goals, could result in cancellation, suspension or material modification of leases or permits affecting surface disturbing activities, including activities conducted by our customers.

If we are unable to renew our leases with the BLM and the State of New Mexico or applicable state or federal policy or rules regarding land use were to alter the rights granted by such leases, we would lose control of the underlying acreage and the associated fees and royalty revenues generated therefrom, which could adversely impact our business and financial condition. Additionally, if the activities that we and our customers are permitted to conduct on our leased lands are materially changed or limited, our ability to retain existing customers and attract new customers to further develop our surface holdings could be negatively impacted and our business, results of operations and financial condition could be materially and adversely affected as a result.

The construction by customers of new infrastructure on and around our land is subject to regulatory, construction, supply chain and other risks common in the development and operation of facilities and other infrastructure.

We intend to receive a portion of our revenues through agreements pursuant to which our customers develop infrastructure on our land. These infrastructure projects involve numerous regulatory, environmental, political and legal uncertainties, including political opposition by environmental groups, local groups and other advocates. Such opposition can take many forms, including the delay or denial of required governmental permits, organized protests, attempts to block or sabotage operations on or around our land, intervention in regulatory or administrative proceedings

 

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related to our customers’ permitting efforts or otherwise involving their assets, or lawsuits or other actions designed to prevent, disrupt or delay the operation of our customers’ assets or their business. There can be no assurance that such infrastructure will be developed at all or that these projects will be completed on schedule or at an economical cost, and we may not realize the anticipated benefits of such projects.

Our customers may also encounter technical difficulties during the construction of such infrastructure, leading to a reduction in capacity or a shorter useful life. Moreover, our customers may undertake expansion projects to capture anticipated future growth that does not materialize or for which they are unable to acquire new customers. As a result, the new facilities and infrastructure developed by our customers on our acreage may not be able to attract enough demand to achieve their expected investment return, which could materially and adversely affect our results of operations, cash flows and financial position.

In addition, acts of sabotage or eco-terrorism could cause significant damage or injury to people, property or the environment or lead to extended interruptions of operations. Moreover, governmental authorities exercise considerable discretion in the timing and scope of permit issuance, and the public may engage in the permitting process, including through intervention in the courts. Broader supply-chain disruptions, driven by changing trade policies, embargoes or customs restrictions, global conflicts, labor unrest or epidemics, can delay materials and equipment availability for pipeline construction and other infrastructure, increasing costs and extending schedules. Negative public perception or changes in governmental policies, priorities or direction could cause the permits our customers require to conduct their operations on and around our land to be withheld, delayed or burdened by requirements that restrict their ability to profitably conduct their business. Any such event that delays or otherwise interrupts the revenues generated by operations on and around our land, or which causes them to make significant expenditures not covered by insurance, could adversely affect payments to us in respect of use of existing infrastructure as well as future development of infrastructure on and around our land.

This offering is conditioned on the occurrence of the Corporate Reorganization, but completion of the Corporate Reorganization and the contributions contemplated in connection with this offering may not occur as currently expected, or at all, which could materially and adversely affect our structure, strategy and the information presented in this prospectus.

The Corporate Reorganization, including the L&E Contribution, the DE Flow Contribution and the Shallow Valley Contribution (collectively, the “Contributions”), is expected to be effected immediately prior to, and is conditioned upon, the consummation of this offering; if this offering is not consummated, the Corporate Reorganization will not be completed. The sequencing and completion of the steps in the Corporate Reorganization may be adjusted for administrative, technical or other reasons, including the timing of required consents and approvals, and remain subject to uncertainties and contingencies outside our control. In addition, actions or decisions by the relevant boards or equityholders of the contributing parties (including withholding or conditioning approvals, changing transaction terms or terminating transaction steps where permitted) could delay, alter or prevent completion of some or all of the Contributions. If any of the Contributions are delayed, altered or fail to occur, our organizational structure, asset base, governance and economic arrangements could differ materially from those described in this prospectus, our pro forma financial information and related disclosures would be rendered inaccurate or require revision and we may need to pursue alternative transactions or strategies, any of which could adversely affect our results of operations, cash flows and financial position.

 

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We have identified material weaknesses in our predecessor’s internal controls over financial reporting, and the failure to achieve and maintain effective internal controls over financial reporting could harm our business and negatively impact the value of our Class A shares. If we are unable to remediate these material weaknesses in a timely manner, we could be required to restate financial statements, delay or file late our periodic reports, incur increased audit and compliance costs, face regulatory scrutiny or litigation, and experience an adverse impact on our reputation, liquidity and cost of capital.

In connection with the audit of our predecessor’s consolidated financial statements as of and for the year ended December 31, 2025, we identified material weaknesses in our predecessor’s internal control over financial reporting that we are currently working to remediate, which relate to: (a) insufficient segregation of duties in the financial statement reporting and general information technology processes; (b) a lack of sufficient levels of staff with public company, technical accounting, and general information technology experience to maintain proper control activities inclusive of detailed account analysis and reconciliations, and perform risk assessment and monitoring activities; and (c) insufficient general information technology controls, including access, security, and change management controls. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have concluded that these material weaknesses in our predecessor’s internal control over financial reporting occurred because our predecessor did not have the necessary business processes, personnel and related internal controls to operate in a manner to satisfy the accounting and financial reporting timeline requirements of a public company.

Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. Weaknesses affecting our financial close, complex/non-routine transactions (including acquisitions and equity-based compensation), income tax accounting, or information technology general controls could increase the risk of errors in our financial statements that may require correction or restatement and could impair management’s ability to certify the effectiveness of disclosure controls and procedures. As a result of being a public company, we will be required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting beginning in the year following our first annual report required to be filed with the SEC. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. While, as an “emerging growth company,” we are not initially required to obtain an auditor attestation report under Section 404(b), we must still perform a management assessment under Section 404(a) and maintain effective disclosure controls under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Exchange Act Rules 13a-15 and 15d-15. If we later cease to qualify for exemptions, we will be subject to auditor attestation, which could further increase costs and scrutiny. We will take steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for our internal control over financial reporting. If we identify one or more material weaknesses in our internal control over financial reporting during the evaluation and testing process, we may be unable to conclude that our internal controls are effective. There can be no assurance as to when we will remediate the identified material weaknesses, that our remediation plans will be effective, or that additional material weaknesses will not be identified in the future.

We are focused on designing and implementing effective internal control measures to improve our evaluation of disclosure controls and procedures, including internal control over financial reporting and remediating the material weaknesses identified in our predecessor’s internal controls over financial reporting. We plan to migrate from multiple legacy systems (including QuickBooks) to a new Oracle

 

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NetSuite ERP; implementation challenges may disrupt operations, delay reporting or create control deficiencies. While our remediation plan includes (i) recruiting additional qualified financial reporting and accounting personnel following the completion of this offering to enhance our financial reporting capabilities; (ii) establishing a SOX compliance program and internal audit function (in-house and/or co-sourced) with direct reporting to the audit committee; (iii) enhancing our financial close and reporting processes, policies and controls, including formal documentation, risk assessment and monitoring; (iv) implementing and enforcing information technology general controls over user access, security, change management, backups and logging, and periodic user access reviews; (v) implementing or upgrading enterprise resource planning and related sub-ledger systems and strengthening IT application controls; (vi) enhancing governance over non-routine and complex transactions (including business combinations, equity awards and income taxes) through technical accounting reviews and documented control approvals; and (vii) increasing oversight of and obtaining third-party SOC 1 reports (or equivalent assurance) for critical outsourced service providers and implementing complementary user controls, we cannot assure you that these measures will prevent or avoid potential future material weaknesses. Further, additional weaknesses in our disclosure controls and internal controls over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such a case, we may be unable to maintain compliance with securities law requirements regarding the timely filing of periodic reports, in addition to the listing requirements of the NYSE and NYSE Texas, and investors may lose confidence in our financial reporting, and our stock price may decline as a result. In addition, control deficiencies could increase audit fees and advisory costs, strain management resources, adversely affect our ability to access the capital markets on acceptable terms, and, in severe cases, lead to debt covenant issues, regulatory investigations, shareholder litigation or delisting risk.

Rapid or sustained technological change in well completions, water sourcing, recycling and produced-water management could decrease demand for our water sales and produced-water transportation, recycling and handling on or around our land, require us or our operating partners to invest in new or unproven technologies at significant cost, and adversely affect our results of operations, cash flows and financial position.

Wide-scale adoption of higher-intensity recycling, beneficial reuse or alternatives to water-based hydraulic fracturing could reduce water demand for completions on our acreage, lower produced-water transport and handling volumes on systems located on or adjacent to our land, or redirect those volumes to infrastructure located off our land. These developments could reduce activity-based surface revenues and per-barrel royalties we receive from our operating partners and customers, including under arrangements that do not include minimum commitments or that are subject to caps, carve-outs or other limitations.

Several operators and service providers are investing in enhanced water recycling and reuse, including treatment of flowback and produced water for recompletion or other industrial uses, and in non-water fracturing techniques utilizing fluids such as propane, carbon dioxide, or nitrogen. If producers on or around our acreage were to shift completions toward higher-recycle designs or waterless fracturing at scale, the demand for our water sales could decline materially, and produced-water gathering and disposal patterns could shift away from facilities on or adjacent to our land, adversely affecting related royalties and fees.

Emerging beneficial-reuse concepts, such as treatment of produced water for industrial processes, non-consumptive agriculture, aquifer or reservoir recharge or technology-sector demand, may, over time, redirect volumes to third-party systems or uses that do not traverse our land or that reduce injection, transportation or handling activity associated with our royalty base, even if such concepts expand the overall market for treated produced water. While we believe beneficial reuse

 

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could create incremental commercial opportunities in the future, the pace, permitting pathways and economics of these applications are uncertain, and commercialization in our areas of operation may not benefit our assets or revenue mix.

Regulatory and permitting dynamics may amplify these technology shifts. In areas affected by seismicity-related constraints, regulators have suspended or limited produced-water injection and established SRAs, which can curtail disposal capacity and accelerate recycling investments by operators. Expanded recycling in response to injection constraints could reduce disposal throughput and associated fees or royalties on systems located on or proximate to our acreage, and prompt producers to re-route volumes to facilities located on third-party lands. In Texas and New Mexico, regulators have implemented protocols and permitting initiatives aimed at addressing seismicity, and additional measures could be adopted in the future that further restrict disposal locations, depths, rates or total volumes. Any of these actions could alter the economics of produced-water handling on our land and increase customers’ incentive to adopt lower-water or waterless completion technologies.

Even where demand persists, our ability to participate in future water-technology trends may depend on access to permits, pore space, ROWs, and long-lead infrastructure. The finite nature of subsurface pore space and evolving preferences for acid-gas or carbon-dioxide injection could compete with or crowd out produced-water disposal, requiring our operating partners to develop alternative facilities on or off our land at higher cost, with extended lead times, or subject to third-party land control. If suitable pore space, ROWs, or permits cannot be obtained on favorable terms near our acreage, volumes could migrate to areas where we do not earn royalties, and our revenues could decline.

Our commercial arrangements mitigate, but do not eliminate, these risks. Certain Midland Basin water-infrastructure revenues are supported by acreage dedications, minimum-volume commitments and long-term agreements, and our Hydrosource Recycling Agreement will include a minimum annual royalty. However, not all agreements contain minimums, and those that do may include caps or other limitations. Even under dedicated or minimum-volume frameworks, customers may satisfy commitments through recycling or alternative handling pathways that reduce brackish water demand or shift produced-water flows away from higher-royalty configurations on our land.

If producers in our areas of operation broadly adopt higher-recycle completions, waterless fracturing or other completion technologies that reduce water intensity, our brackish water sales could decline, potentially on short notice and without compensation under our agreements. Likewise, if produced-water throughput to facilities on or adjacent to our acreage decreases due to seismicity-driven operating limits, beneficial-reuse programs, permitting delays or denials or competition for pore space from other subsurface uses, our surface-use revenues and per-barrel royalties from gathering, transportation, recycling and disposal could be adversely affected. In each case, we and our operating partners could face pressure to invest in new treatment, recycling, desalination or delivery technologies to remain competitive, and such investments may require significant capital, involve execution and permitting risk or fail to generate returns commensurate with the cost. Any of these outcomes could have a material adverse effect on our results of operations, cash flows and financial position.

Inadequate water supplies could have a material adverse effect on our revenues.

One of our significant sources of revenue is the sale of water for use in oil, natural gas and NGLs drilling and completion operations. Our ability to meet the existing and future demand for water depends on an adequate supply of such water from our acreage. Additionally, regulatory restrictions on the use of water and the development of water wells, lack of available water rights, drought, overuse of sources of water, protection of threatened species or habitats or other factors may limit the availability of water. No assurance can be given that we will be able to produce enough water to fully satisfy future customer demand.

 

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If we are unable to produce adequate water supplies, our results of operations, cash flows, and financial position may be adversely affected by, among other things, the following:

 

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a reduction in the amount of water we sell and reduced revenues therefrom;

 

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an increase in operating costs; and

 

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an increase in capital expenditures associated with building pipelines to connect to alternative sources of water supply, new wells to replace those that are no longer in service or are otherwise inadequate to meet the needs of customers, and reservoirs and other facilities to conserve or reclaim water.

We may or may not be able to recover increased operating and capital costs as a result of water shortages on a timely basis, or at all.

Competition in the energy industry is intense, which may adversely affect our and our customers’ and operating partners’ ability to succeed.

The energy industry is intensely competitive, and our customers and operating partners (including Hydrosource and Double Eagle) compete with other companies that may have greater resources. Many of these companies explore for and produce oil, natural gas and NGLs, conduct midstream and refining operations, engage in the recycling and reuse of produced water, and market petroleum and other products on a regional, national or worldwide basis. In addition, these companies may have a greater ability to continue operational activities during periods of low oil, natural gas and NGLs market prices. Our customers’ and operating partners’ larger and better capitalized competitors may be able to absorb the burden of present and future federal, state, local and other laws and regulations more easily than they can, which would adversely affect their competitive position. Our customers and operating partners may have fewer financial and human resources than many companies in their industry and may be at a disadvantage in bidding for developmental, transportation, gathering or exploratory prospects, conducting water recycling activities, expanding water recycling infrastructure, and producing or servicing oil, natural gas and NGLs properties. Furthermore, the oil and natural gas industry has experienced recent consolidation amongst some operators, which has resulted in certain instances of combined companies with larger resources. Such combined companies may compete against our customers or, in the case of consolidation amongst our customers, may choose to focus their operations on areas outside of our properties. In addition, our ability to acquire additional properties upon which potential customers may operate in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Other risks as a result of competition and evolving markets may include but are not limited to: pricing pressure driven by new competition; volatile and/or unexpected operating and maintenance costs; lack of sufficient customers or loss of significant customers for the new line of business; increased regulation, including with respect to environmental and geological uses and impacts on industry operations; and uncertainty regarding outsourced third-parties, including our operating partners, providing water treatment recycling services.

Sand 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 land.

We do not operate the sand mines on our land, but certain of our customers may do so in the future. Customers who conduct such operations may be subject to risks normally encountered in the mining industry generally and the sand mining industry in particular. These risks include:

 

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changes in the price and availability of transportation, natural gas or electricity;

 

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unanticipated ground, grade or water conditions;

 

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unforeseen issues with sand quality or suitability for use in oil and gas completion operations;

 

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unusual or unexpected geological formations or pressures;

 

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pit wall failures or surface rock falls;

 

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inclement or hazardous weather conditions;

 

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environmental hazards contamination and industrial accidents;

 

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changes in applicable laws and regulations (or the interpretation thereof);

 

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inability to maintain necessary permits or mining or water rights;

 

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restrictions on blasting operations;

 

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inability to obtain necessary mining or production equipment or replacement parts;

 

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fires, explosions or industrial accidents or other accidents;

 

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technical difficulties or key equipment failures;

 

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labor disputes;

 

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late delivery of supplies; and

 

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facility shutdowns in response to environmental regulatory actions.

Any of these risks could result in damage to mining properties or production facilities, personal injury, environmental damage, delays in mining or processing, losses or possible legal liability. Any prolonged downtime or shutdowns of mining properties or production facilities could have a material adverse effect on our results of operations, cash flows and financial position.

In addition, transportation and related logistics costs are a significant component of the total delivered cost of sand for oil and natural gas operations. As a result, the cost of transporting sand to the well site is a key factor in our customers’ purchasing decisions. The development of additional in-basin sand mines that are closer to areas of drilling activity could reduce demand for sand produced from our land. For example, a number of companies have announced plans to develop or acquire, are currently developing or expanding, or have recently acquired or completed sand mine projects in the Permian Basin that may be closer to ongoing development activity. Any such reduction in demand for sand from our land could materially affect our results of operations, cash flows and financial position.

Interruption of our customers’ supply chains could negatively impact our business and operations as well as reduce our revenues.

Our business model depends on the timely execution of drilling, completion, water management, midstream buildout and other infrastructure and extraction activities conducted by our customers and operating partners on and around our acreage in the Permian Basin. Any material interruption in our customers’ supply chains, including shortages, delays or increased costs for critical inputs and services, could reduce activity levels on or around our land, delay construction and development and decrease the royalties and fees we earn, thereby adversely affecting our results of operations, cash flows and financial position. Our customers rely on third party goods and services to drill and complete wells and to construct and operate gathering, produced water handling, recycling and disposal systems, power and grid interconnections and other infrastructure on our land, including drilling and completion equipment, pipe, pumps, electrical gear, chemicals, sand and proppant, caliche and road materials, heavy construction equipment and trucking and pipeline services, as well as skilled labor. Disruptions can arise from interruptions in service by third party providers or common carriers, congestion in regional logistics networks, tariffs and other trade restrictions, embargoes or customs

 

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rules, social or labor unrest, natural disasters, epidemics or pandemics, and political disputes or military conflicts, any of which can materially disrupt our customers’ supply chains. If these materials and services are unavailable when needed, are delayed, or can only be procured at uneconomic prices, our customers may defer, curtail or resequence operations, which would negatively impact payments to us under our surface use agreements, water sales, produced water royalties and other revenue streams.

Because a substantial portion of our revenues is activity linked, arising from surface use fees, easements and rights of way, brackish water sales, produced water transportation, recycling and disposal royalties and resource sales such as caliche, extended procurement delays or shortages for our customers can directly reduce the number, pace or scale of projects undertaken on our land. Our operating partners’ systems and commitments amplify this exposure. In the Midland Basin, our DE Flow System has peak handling capacity of approximately 400 MBbls/d and is backed by long-term acreage dedications and minimum volume commitments, but sustained supply chain constraints affecting pipeline, pump, electrical or disposal well equipment could limit throughput growth, delay tie ins or expansions or require reprioritization of projects, thereby reducing royalties and fees we expect to receive. Our Hydrosource Recycling Agreement will include a minimum annual royalty, and it will entitle us to per barrel royalties on certain recycled-water volumes sold across the Permian Basin, but equipment shortages, permitting delays, or inability to procure chemicals, power, trucking or commissioning services at reasonable rates could still defer or diminish activity and related payments to us. Regulatory and permitting constraints, including seismic response plans in Texas and New Mexico and produced water permitting practices, can further slow system adjustments, and weather and natural disasters can restrict site access, damage infrastructure or disrupt power and transportation networks, which together can delay construction and reduce handled volumes and near term revenues.

For example, a frac crew may be deferred because high pressure pumps or replacement parts are unavailable, which would reduce contemporaneous water sales and related surface use fees. Likewise, a delay in procuring electric transformers or switchgear needed to energize a water recycling facility could postpone ramp up of produced water handling volumes and associated royalties, and a shortage of pipe and valves could delay a produced water lateral tie in across our rights of way, deferring throughput and payments under our customers’ contracts. In addition, trade policy actions by the U.S. federal government or foreign governments, including tariffs, sanctions or other restrictions on cross-border movement of equipment and materials, and retaliatory measures, can increase costs, reduce availability and dampen activity levels and demand for the use of our land and resources, while macroeconomic volatility, including interest rates, commodity prices and consolidation among upstream operators, can influence capital allocation and procurement in ways that intensify constraints or extend lead times. Although our agreements often include fee schedules, exclusivity on resources or minimum commitments for certain services, none of these terms fully insulates us from the timing and volume impacts that follow extended supply chain disruptions, and prolonged or severe disruptions could materially and adversely affect our results of operations, cash flows and financial position.

Operational disruptions on or around our land from weather, natural disasters, terrorism or other similar causes could impact our results of operations, cash flows and financial position.

Operational disruptions on or around our land may arise from a wide range of acute and chronic events, including severe weather and climate-related events (such as extreme heat, winter storms and freezes, drought, heavy rainfall and flooding, hail and high winds and tornadoes), geologic events (including earthquakes), wildfires and smoke, power grid instability and outages, cyber-physical attacks, terrorism, sabotage, vandalism, civil unrest or other similar causes. These events could damage or destroy infrastructure located on or near our land, including roads, pad sites, electric transmission and distribution lines, water sourcing and disposal systems, communications networks

 

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and our customers’ gathering, processing and transportation infrastructure, and could result in evacuation orders, road closures, curtailments and extended downtime, any of which could disrupt operations on or around our land.

Additionally, our land is located in the Permian Basin, which is susceptible to periods of extreme heat, high winds and dust storms, intense thunderstorms, hail, flash flooding and winter freezes, as well as seismicity that may be associated with regional subsurface activities. These conditions could limit access to our land or facilities for extended periods, interrupt utility service (including electricity and water) and damage or otherwise impair our customers’ wells, tanks, gathering lines, processing facilities and other infrastructure. In addition, emergency response constraints, workforce safety stand-downs, third-party force majeure declarations and supply chain interruptions (including shortages of steel, sand, chemicals, fuel and replacement parts) could extend related downtime and increase repair costs. Such disruptions could materially and adversely affect our results of operations, cash flows and financial position.

Broader regional or global incidents—such as public health emergencies, pandemics or epidemics; prolonged power or telecommunications outages; or geopolitical conflicts—could similarly disrupt our or our customers’ businesses by restricting access to our land, reducing workforce availability, limiting contractor and supplier capacity, constraining the availability or increasing the cost of critical materials and services and curtailing demand or timing for our customers’ production and development activities.

Any such destruction of or damage to infrastructure or interruptions of operations could materially and adversely affect our results of operations, cash flows and financial position. Moreover, insurance may not be available, sufficient or collectable to cover all resulting losses or increased costs (including higher deductibles, exclusions for certain perils or premium increases upon renewal). Repeated or severe events could also prompt changes in laws, regulations, permitting practices or land-use restrictions applicable to our land or our customers’ operations, which could increase their costs, impose additional operational constraints or delay development. Finally, prolonged disruptions could adversely affect our relationships with customers and counterparties and could lead to disputes or litigation over performance, access, remediation obligations or force majeure, each of which could further impact our financial condition and results of operations.

We 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.

Our or our customers’ ability to conduct operations is subject to a variety of required permits from various governmental authorities, which may limit such operations, including those associated with oil and natural gas drilling, completion and production activities, disposal or transport of produced water and other hazardous materials or wastes, construction, stormwater, water use, air emissions, mining, and other activities that may be conducted in association with operations on our land. The public often has the right to comment on permit applications and otherwise participate in the permitting process, including through court intervention. In addition, governmental authorities at the federal, state and local levels often retain significant discretion over these types of permits and may exercise that discretion based on shifting governmental policies, priorities and direction. Accordingly, permits required to conduct our or our customers’ operations may not be issued, maintained or renewed, may not be issued or renewed in a timely fashion or may involve requirements that restrict our or our customers’ ability to economically conduct operations. Limitations on our or our customers’ ability to conduct operations due to the inability to obtain or renew necessary permits or similar approvals could materially and adversely affect our results of operations, cash flows and financial position.

 

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In particular, permits for produced water handling and disposal, air emissions, dredge and fill activities and surface-disturbing construction have become subject to heightened scrutiny, evolving technical standards and more frequent third-party challenges, which can extend timelines, increase costs or result in permit denials or revocations after issuance. In Texas and New Mexico, regulators have adopted seismic response measures and other directives that restrict or suspend certain produced water injection activities within designated areas, and future expansions of these measures could materially limit operations on or around our land, even where facilities previously operated in compliance with prior permits and practices. Moreover, changes in federal and state species-protection regimes and habitat designations, as well as local land-use controls, can impose additional permit conditions, seasonal timing restrictions or area-specific prohibitions that constrain drilling, infrastructure development and waste-handling activities on or adjacent to our acreage. Agencies also retain broad discretion to require enhanced monitoring, mitigation and reporting, or to reopen permits based on new information or policy priorities, which can increase compliance costs and delay development schedules for projects that are integral to our revenue streams. Finally, citizen suits, administrative appeals and other litigation can stay, overturn or narrow permits and approvals, even where applicants have satisfied all regulatory prerequisites, resulting in interruptions to operations, increased legal and consulting expenses and the need to redesign projects or seek alternative sites and ROWs.

The 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.

For the year ended December 31, 2025, on a pro forma basis, revenues from each of Double Eagle and Devon Energy Corporation individually comprised more than 10% of our total revenues and collectively represented 41.0% of our total revenues. Matador Production Company, Targa Resources Corp., MPLX LP and Chevron Corporation individually each comprised 17.1%, 14.1%, 11.3% and 10.6% of accounts receivable and collectively represented 53.1% of our outstanding accounts receivables at such date on a pro forma basis. For the year ended December 31, 2024, our predecessor’s revenues from Matador Production Company, Coterra, Permian Resources Operating LLC and EOG Resources Inc. each individually comprised more than 10% of our total revenues and collectively represented 68% of our total revenues. Matador Production Company and Texas Pacific Water Resources LLC individually each comprised approximately 59% and 10% of accounts receivable and collectively represented approximately 69% of our outstanding accounts receivables at December 31, 2024. No other customer accounted for more than 10% of our total revenues or outstanding accounts receivable.

We expect to continue to depend on key customers to support our revenues for the foreseeable future, and although most of our customers on our land are under long-term contracts, each of these customers has the right to reduce or cease operations on our acreage at their sole discretion under certain circumstances, as our contracts with such customers generally do not contain minimum commitment provisions for land use or brackish water volumes to be purchased. See “Business—Customers; Material Contracts and Marketing” for further information on our agreements with these customers. The loss of revenue derived from any of these customers’ operations on our land could adversely affect our results of operations, cash flows and financial position. During times when the oil and natural gas markets weaken, our customers are more likely to experience financial difficulties, including generating less cash flow due to lower oil and natural gas prices and being unable to access or receive favorable terms in connection with debt or equity financing, which could result in a reduction in our customers’ activities on or around our land. Furthermore, the determination by a customer to initiate or maintain activities on or around our land largely depends on the location of our surface acreage relative to the nature and location of such customer’s operations and such customer’s need for the use of our land and resources. Our customers are limited to entities operating on and around our acreage in the Permian Basin.

 

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We cannot assure you that any of our customers will continue to do business with us. If these customers do not maintain their activities on or around our land, their demand for use of our land and resources will be reduced. The loss of revenue from key customers, failure to renew contracts upon expiration, or a sustained decrease in demand by key customers could result in a substantial loss of revenues and could materially and adversely affect our results of operations, cash flows and financial position.

The unavailability, high cost or shortages of equipment, raw materials, supplies or personnel may restrict or result in increased costs for our customers related to their operations on and around our land.

The energy industry is cyclical, which can result in shortages of equipment, raw materials, supplies and personnel. When shortages occur, the costs and delivery times of equipment and supplies increase and demand for, and incentive costs and wage rates of, qualified personnel also rise with increases in demand. In addition, capital and operating costs in the energy industry have generally risen during periods of increasing commodity prices as operators seek to increase production to capitalize on higher commodity prices. We cannot predict whether these conditions will exist in the future and, if so, what their timing and duration will be. In accordance with customary industry practice, the operators on and around our land rely on independent third-party service providers to provide many of the services and equipment necessary to drill new wells. The cost of oilfield services typically fluctuates based on demand for those services, and the increase in commodity prices and supply constraints due to tariffs, the conflicts in Ukraine and the Middle East, elevated interest rates and associated policies of the Federal Reserve or otherwise, have increased the cost of oilfield services. While we believe the operators on and around our land currently have strong relationships with the oilfield service companies they contract with, there is no assurance that such operators will be able to contract for such services on a timely basis or that the cost of such services will remain at a satisfactory or affordable level. If such operators are unable to secure the equipment and supplies they require at reasonable costs, our financial condition and results of operations could suffer.

Because a substantial portion of our revenues is activity-linked, extended procurement delays or shortages for our customers can directly reduce the number, pace or scale of projects undertaken on or around our land and diminish the royalties and fees we earn, even where we have long-term agreements, acreage dedications or minimum commitments. For example, a frac crew may be deferred because high-pressure pumps or replacement parts are unavailable, which would reduce contemporaneous water sales and related surface-use fees; a delay in procuring electric transformers or switchgear needed to energize a water recycling facility could postpone ramp-up of produced-water handling volumes and associated per-barrel royalties; and a shortage of pipe and valves could delay a produced-water lateral tie-in across our rights of way, deferring throughput and payments under our customers’ contracts. Broader supply-chain disruptions, including tariffs, sanctions or other trade restrictions, embargoes or customs rules, social or labor unrest, natural disasters, epidemics or pandemics, and political disputes or military conflicts, can materially disrupt our customers’ supply chains and elevate costs, further dampening activity levels and demand for the use of our land and resources. Although our commercial arrangements often include specified fee schedules, exclusivity on certain resources and, in some cases, minimum-volume commitments, these provisions do not eliminate the timing and volume risks associated with supply-chain constraints, and prolonged or severe disruptions could materially and adversely affect our results of operations, cash flows and financial position.

 

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We may experience delays in the payment of royalties and fees and be unable to replace customers or operators on our land that do not make required payments to us, and we may not be able to terminate our agreements with defaulting customers or operators that declare bankruptcy.

We may experience delays in receiving royalties, fees and other payments from our customers or operators on our land. A failure on the part of a customer or operator to make royalty payments typically gives us the right to enforce payment obligations under the agreement and/or terminate the agreement. With respect to a customer or operator that is subject to a proceeding under Title 11 of the United States Code (the “Bankruptcy Code”), our right to enforce or terminate the agreement for any defaults, including nonpayment, may be substantially delayed or otherwise impaired. In general, in a proceeding under the Bankruptcy Code, the bankrupt customer or operator would have a substantial period of time to decide whether to ultimately reject or assume our agreement, which could prevent the execution of a new agreement or the assignment of the existing agreement to another customer or operator. In the event that the customer or operator rejected the agreement, our ability to collect amounts owed would be substantially delayed, and our ultimate recovery may be only a fraction of the amount owed or nothing. In addition, if we are able to enter into a new agreement with a new customer or operator, the replacement customer or operator may not achieve the same levels of activity on or around our land at the same price as the customer or operator it replaced.

Additionally, we are subject to the risk of loss resulting from nonpayment or nonperformance by our customers of their respective obligations. Although we maintain policies and procedures to limit such risks, our credit procedures and policies may not be adequate to fully eliminate customer credit risk. If we fail to adequately assess the creditworthiness of existing or future customers or unanticipated deterioration in their creditworthiness, any resulting increase in nonpayment or nonperformance by them of their respective obligations, and our inability to collect on outstanding receivables or find substitute customers could have an adverse effect on our results of operations, cash flows and financial position. A decline in oil, natural gas and NGLs prices could negatively impact the financial condition of our customers and sustained lower prices could impact their ability to meet their obligations to us. Further, our contract counterparties may not perform or adhere to our existing or future contractual arrangements. To the extent one or more of our contract counterparties is in financial distress or commences bankruptcy proceedings, contracts with these counterparties may be subject to renegotiation or rejection under applicable provisions of the Bankruptcy Code. Any material nonpayment or nonperformance by our contract counterparties due to inability or unwillingness to perform or adhere to contractual arrangements could adversely affect our results of operations, cash flows and financial position.

The fees charged to customers under our agreements for the gathering, transportation or handling of all our resources may not escalate sufficiently to cover increases in costs.

Though we incorporate inflation escalators in most of our long-term customer contracts, contractual provisions providing for inflation escalators in certain contracts are subject to caps, which may limit the amount of any single pricing increase, and may also vary as to the commencement date of such increases and the timing and calculation of the applicable adjustment. As a result, inflation may outpace the revenue adjustments provided by those provisions. Our customers may also experience supply chain constraints, due to international trade policies or otherwise, and inflationary pressure on their cost structures, which could impact the revenues we receive from them. Our customers also may face shortages of equipment, raw materials, supplies, commodities, labor and services, which may prevent them from executing their development plans on or around our land. These supply chain constraints, trade policies and inflationary pressures may continue to adversely impact our customers’ operating costs and, if they are unable to manage their supply chain, it may impact their ability to procure materials and equipment in a timely and cost-effective manner, if at all, which could materially

 

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and adversely affect the revenues received in respect of our customers’ operations on or around our land and consequently our business, results of operations and financial condition.

We and our customers 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 have a material and adverse effect on our results of operations, cash flows and financial position.

We and our customers may be subject to hazards and operational risks associated with their operations, which include, or may in the future include, oil and natural gas drilling, completion and production activities, sand mining, production and distribution of water, water handling, waste disposal, construction and operation of non-hazardous oilfield reclamation and solid waste facilities, power storage, microgrids, fuel stations, battery, wind and/or solar facilities, and any other operations, including our associated operations, that may occur on our properties now or in the future. These hazards may include the risk of fire, explosions, blowouts, seismic events, surface cratering, uncontrollable flows of oil, natural gas, NGLs and produced water, pipe or pipeline failures, abnormally pressured formations and pore spaces, casing collapses and environmental hazards such as oil and NGL spills, natural gas leaks and ruptures or discharges of toxic gases, release of hazardous materials into the environment and worker health and safety issues. The occurrence of any of these events could result in interruption of our customers’ operations or substantial losses to us and our customers due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigations and penalties, suspension of operations and repairs required to resume operations, which could have a material adverse effect on our results of operations, cash flows and financial position.

Litigation arising from operations on our properties may cause us to be named as a defendant in lawsuits asserting potentially large claims, including claims for defense, indemnity, and exemplary damages. Our business entails frequent interaction with landowners, regulators and E&P counterparties that can give rise to disputes, including access, damages or environmental claims. We generally seek indemnity from our customers for liabilities arising from their operations on our land, and we maintain what we believe is customary and reasonable insurance to protect our business against these potential losses, but such indemnity and insurance may not be adequate to cover our liabilities, and we are not fully protected or insured against all risks.

Subject to certain exceptions, our customers assume responsibility for, including control and removal of, all other pollution or contamination that may result from their operations on our properties. We may have liability in such cases if we are grossly negligent or commit willful acts, or as owners of the land under laws that impose strict, joint and several liability for pollution clean-up, such as CERCLA (as defined herein). Our customers generally agree to indemnify and defend us against claims relating to contamination resulting from their operations and related closure and remedial obligations, damage or loss of a well, reservoir, geological formation, underground strata or water resources, or the loss of oil, natural gas, mineral or water, but sometimes such indemnity and defense is subject to exceptions for claims for gross negligence or willful misconduct, and we may not be able to collect under these indemnities if the applicable customer is in financial distress. Our customers also generally assume responsibility for claims arising from their employees’ personal injury or death, or the damage or loss of their property, to the extent that their employees are injured or their properties are damaged by operations on our properties, but sometimes such indemnity and defense is subject to exceptions for claims resulting from our gross negligence or willful misconduct, and we may not be able to collect under these indemnities if the applicable customer is in financial distress. Further, we might not succeed in enforcing such contractual risk allocation or might incur an unforeseen liability falling outside the scope of such risk allocation.

 

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The occurrence of any of these events could result in interruption of our customers’ operations or substantial losses to us or our customers, which could materially and adversely affect our results of operations, cash flows and financial position.

Our 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.

While we maintain insurance coverage at levels that we believe are reasonable and prudent for a Permian Basin-focused land management company, our policies are subject to deductibles, self-insured retentions, exclusions and sublimits, including for pollution, cyber, named storms and seismic events, and certain risks may be uninsurable or uneconomic to insure at desired limits. We can provide no assurance that our current levels of insurance will be sufficient to cover any losses that we have incurred or may incur in the future, whether due to these retentions, coverage challenges or other limitations, and proceeds, if any, may not be paid in a timely manner. Moreover, we may not be able to maintain adequate insurance in the future at rates or on other terms we consider commercially reasonable, including as insurers raise rates or reduce capacity for traditional energy-related risks.

Our business model depends heavily on activities conducted by our customers and operating partners on and around our surface acreage, and although our contracts generally require them to carry specified insurance, name us as an additional insured on a primary and non-contributory basis, provide waivers of subrogation and furnish evidence of coverage, such obligations are subject to carve-outs (including for our gross negligence or willful misconduct), counterparty credit risk and claims-made program limitations. As a result, we cannot guarantee continuous compliance or that such policies will respond to all losses. We also generally seek indemnities from customers for liabilities arising from their operations, but those indemnities may be limited or unenforceable and, if a counterparty is in financial distress, may not be collectible.

Because our acreage is located in the Permian Basin, our exposure to extreme weather and natural hazards, such as storms, floods, tornadoes, droughts, wildfires and seismic events, can increase the likelihood of property damage and operational interruptions that may fall within policy exclusions, sublimits or elevated deductibles, or for which insurance may be unavailable. In addition, our growing reliance, and that of our customers and vendors, on information technology systems supporting activities such as produced water handling, sourcing and delivery, and rights-of-way administration exposes us to cyber incidents. While we maintain commercially reasonable safeguards, cyber risks are evolving and may exceed available insurance, particularly where policies include cyber sublimits or exclusions. If a significant event were to occur and its consequences were not covered by insurance or not fully insured, or if payment of a major insurance claim were significantly delayed or denied, our results of operations, cash flows and financial position could be materially and adversely affected.

Cyber incidents or attacks targeting systems and infrastructure used by the energy and infrastructure sectors, or systems we and third-parties use to administer surface access, SUAs, easements, ROWs and water midstream activities on and around our acreage, may adversely impact our operations, and a cyber incident or systems failure could result in information theft, data corruption or operational disruption and our results of operations, cash flows and financial position may be adversely impacted.

We and our customers increasingly rely on uninterrupted information technology systems and digital technologies to operate our respective businesses. This reliance extends to the majority of our and our customers’ operations, from monitoring and managing critical infrastructure to processing and storing proprietary and sensitive information, including systems supporting activities on and around our acreage, such as produced water gathering and disposal (including SWDs), water sourcing and

 

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delivery, recycling facilities, pipeline and power transmission ROWs, wind leases and other infrastructure. Our information technology systems and networks, and those of our customers, vendors and other business partners, are subject to damage or interruption from cyberattacks, power outages, computer and telecommunications failures, catastrophic events, such as natural disasters or acts of war or terrorism, usage errors by our employees or other personnel and other events unforeseen or generally beyond our control. Damage or interruption to information technology systems could result in significant costs and may lead to significant liability, loss of critical data, reputational damage and disruptions to services or operations.

Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow. Cyber incidents, including deliberate attacks, have increased in frequency globally, with energy-related assets particularly at risk. Due to the critical nature of these assets, any such attack on energy infrastructure could result in widespread service disruptions and challenges in maintaining public trust. The U.S. government has issued public warnings that specifically indicate energy assets could be targets of cybersecurity threats. Our technologies, systems and networks, and those of our customers, affiliates, vendors and other business partners, may become the target of cyberattacks or information security breaches that could result in the unauthorized access, release, gathering, monitoring, corruption, misuse or destruction of proprietary, personal and other information, or other disruption of business operations. Any such event could lead to significant liability, loss of critical data, reputational damage and disruptions to our services or operations.

While we have implemented and maintain commercially reasonable security measures and safeguards, such security measures and safeguards may not be sufficient to protect against an attack. We do not own or operate most of the infrastructure on our land, which increases our dependence on the cybersecurity and operational resilience of third parties. Attackers are increasingly using advances in technologies, such as artificial intelligence and encryption bypasses that may evade our efforts. Emerging artificial intelligence technologies may improve or expand the capabilities of malicious third parties in a way we cannot predict at this time, including being used to develop new hacking tools, exploit vulnerabilities, obscure malicious activities and increase the difficulty of detecting threats. Moreover, some of our networks and systems are managed by third-party service providers and are not under our direct control. We regularly enter into transactions with third parties, some of whom may have less sophisticated electronic systems or networks and may be more vulnerable to cyberattacks. Our reliance on these third parties means that any vulnerability in their systems could propagate to our own systems, increasing our risk exposure despite our internal controls.

In addition, certain cyber incidents, such as surveillance, ransomware, deepfake-based social engineering attacks, and credential stuffing, may remain undetected for some period of time, and cybersecurity incidents and attacks are continually evolving and unpredictable. As cyber incidents and attacks continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents. While we utilize various procedures and controls to reduce the risk of the occurrence of cyber incidents, there can be no assurance that our business, finances, systems and assets will not be compromised in a cyber incident. Any failure or perceived failure to detect or respond effectively to a cybersecurity incident could lead to significant liability, undermine shareholder and stakeholder trust and negatively impact business continuity. Furthermore, we are subject to an evolving regulatory landscape, including state, federal and international data privacy laws that require rigorous cybersecurity standards and standards relating to artificial intelligence. Compliance with various data privacy and cybersecurity regulations may impose significant costs, and any perceived or actual failure to comply could result in regulatory penalties, litigation and reputational harm.

 

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The Unaudited Pro Forma Condensed Consolidated Financial Statements, and any other pro forma data, included herein are based on a number of preliminary estimates and assumptions and our actual results of operations, cash flows and financial position may differ materially.

The Unaudited Pro Forma Condensed Consolidated Financial Statements, and any other pro forma or pro forma, as adjusted information included in this prospectus, are based on numerous preliminary estimates and assumptions and are presented for illustrative purposes only. Our actual results of operations, cash flows and financial position following the contemplated transactions may differ materially and adversely from such pro forma or pro forma, as adjusted information. The pro forma and pro forma, as adjusted presentations reflect the effects of specific transactions and structuring steps, including the Accelerated Acquisition, the exclusion of the Excluded Assets, the Shallow Valley Contribution, the DE Flow Contribution, the Up-C Reorganization and this offering, as well as the application of the net proceeds therefrom as described under “Use of Proceeds,” and are not necessarily indicative of the results that would have been achieved had those transactions occurred on the dates assumed, nor are they indicative of our future results. Our pro forma information is derived from historical financial statements of L&E (our predecessor), and incorporates transaction accounting and reclassification adjustments to conform presentations across L&E, Accelerated, DE Flow and Shallow Valley. These adjustments are preliminary, based on currently available information and management assumptions that we believe are reasonable, but actual purchase accounting and conforming adjustments could differ materially once final valuations and alignments are completed. The Unaudited Pro Forma Condensed Consolidated Financial Statements have been prepared with the predecessor as the accounting acquirer under GAAP using the acquisition method in accordance with ASC 805 and fair value concepts under ASC 820, and reflect preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. These estimates are subject to change during the measurement period (which may extend up to one year from each acquisition date) as additional information becomes available, and any such changes could materially affect future depreciation, amortization, deferred taxes, goodwill, intangible asset values and related expenses.

Because the pro forma, as adjusted presentations assume this offering and the Up-C Reorganization occurred at specified dates, they embed assumptions regarding corporate structure, equity ownership and non-controlling interest that may not reflect our actual post-offering capitalization over time, particularly as OpCo Unitholders exercise redemption or exchange rights and our relative interest in OpCo increases, which may reduce comparability with historical or pro forma periods. The pro forma, as adjusted information assumes an application of net offering proceeds that includes repayment and termination of our Predecessor Credit Facility and funding for general corporate purposes. Changes in actual offering size, pricing, exercise of the underwriters’ option to purchase additional Class A shares, timing of closing or changes in the planned uses of proceeds would result in material differences from the pro forma balance sheet, capitalization and earnings profiles presented. Our pro forma, as adjusted tax provision reflects an assumed blended statutory tax rate associated with our election to be taxed as a corporation. Actual effective tax rates may differ due to changes in tax laws, regulations, apportionment, state mix, valuation allowances, permanent differences or the final purchase accounting for acquired assets and liabilities. The pro forma presentations necessarily exclude various incremental operating expenses and one-time costs, including certain public company costs, integration and transition costs and systems alignment expenses associated with combining the contributed assets and entities. Our actual results after the Pro Forma Transactions will reflect such costs and may therefore be less favorable than the unaudited pro forma information. The Accelerated Acquisition financing, warrant issuances and subsequent modifications, as well as any fair value changes for liability-classified warrants, could result in earnings volatility or differences from pro forma assumptions if accounting conclusions or fair value measurements differ from preliminary estimates.

Our pro forma results incorporate adjustments related to the exclusion of the Excluded Assets and the inclusion of the DE Flow Contribution and Shallow Valley Contribution. If the final terms,

 

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closing dates, fair value determinations, asset performance or integration outcomes differ from the assumptions reflected in the pro forma information, our actual revenues, margins, depreciation and amortization and cash flows could vary materially. Pro forma presentations rely on historical carve-out financial statements for certain contributed businesses and on reclassification adjustments to align accounting policies and presentation. Inaccuracies, limitations or subsequent updates to such historical financial statements, or differences in finalized policy alignments, could materially change the effects reflected in our unaudited pro forma financial information. In addition, assumptions embedded in our pro forma liquidity and capitalization, including the availability and expected use of the Credit Facility, our anticipated cash needs and our projected ability to fund operations and potential dividends from Free Cash Flow, are inherently uncertain and depend on factors outside our control, including activity on our acreage and broader market conditions. Adverse developments could require different financing strategies than those reflected in the pro forma presentations. For these reasons, investors should not place undue reliance on the Unaudited Pro Forma Condensed Consolidated Financial Statements or other pro forma, or pro forma, as adjusted information. Future results may differ from the pro forma information and the differences may be material and adverse.

Title to the properties in which we have an interest may be impaired by title defects.

Title defects can arise in numerous ways that may not be apparent from public records or typical broker-level examinations, including gaps or breaks in the chain of title; conflicting conveyances and reservations of mineral, royalty, overriding royalty or non-participating royalty interests; unrecorded liens or claims; heirship, probate or estate matters; survey or boundary discrepancies; prior lease terminations or expirations; pooling, unitization or spacing irregularities; and failures to properly record, authorize or index instruments in applicable counties or agencies. Any such defect may result in challenges to our ownership, curative costs, delays in development on or around our land, or the loss or dilution of our interests. Even when defects are identified, curative actions may be impracticable, costly or time-consuming, and there is no assurance we will be able to obtain satisfactory remedies. Curing title defects can require additional title work, new conveyances, ratifications, stipulations, corrective instruments, quiet title actions or other litigation, consents from third parties or governmental authorities, and payment of consideration to adverse claimants, any of which may delay commercial arrangements and increase transaction or operating costs. Moreover, sellers may be unwilling or unable to provide effective indemnities or other protection against all or part of identified problems, and title insurance may be unavailable or limited in scope. Our operations depend on a mosaic of surface and easement interests assembled over time; defects, competing claims, restrictive terms or challenges by counterparties could interrupt operations, increase costs or reduce revenues. Disputes regarding surface damages, access or use restrictions can be frequent and costly in our operating areas, and an adverse outcome could affect service availability or pricing. Title deficiencies can directly affect our revenues and liquidity.

New trade policies, such as tariffs, could adversely affect our operations, costs, and business.

There is currently significant uncertainty regarding the future relationship between the United States and various other countries arising from changes that may be implemented by the current presidential administration, including with respect to trade policies, treaties, tariffs, taxes, and other limitations on cross-border operations. Any actions taken by the United States’ federal government that restrict or otherwise impact the economics of trade—including tariffs, trade barriers, or other similar measures—could have the potential to disrupt existing supply chains and trigger retaliatory efforts by other countries, including the imposition of tariffs, raising taxation, setting foreign exchange or capital controls, or establishing embargos, sanctions, or other import/export restrictions, thereby negatively impacting our business, both directly and indirectly. These developments, or the perception that more of them could occur, may materially adversely affect the global economy and stability of global financial markets, potentially reducing trade and depressing economic activity. Such changes in international

 

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trade policies may result in direct impact to our business or that of our operators through increased costs, changes in business prospects or operating results, which could adversely affect our financial condition. The extent of such impacts cannot be predicted at this time.

Risks Related to Environmental and Regulatory Matters

Oil, natural gas and NGLs operations are subject to various governmental laws and regulations. Compliance with these laws and regulations can be burdensome and expensive for our customers, and failure to comply could result in our customers incurring significant liabilities, either of which may impact our customers’ willingness to operate on our surface acreage and may subject us to strict, as well as joint and several, liability for contamination resulting from such failure, even if we do not have control over such operations. We generally do not control our customers’ operations on our surface acreage and cannot ensure their compliance with applicable requirements, which may increase our residual exposure notwithstanding contractual indemnities and insurance.

The value of the revenues we receive from the use of our surface acreage and resources by our customers is substantially based on the level of oil and natural gas drilling and production and transportation and gathering activities with respect thereto. Our customers’ level of activities on our surface acreage is subject to various federal, state and local governmental laws and regulations that may change from time to time in response to economic and political conditions. Matters subject to these laws and regulations include drilling operations, production, gathering, transportation and distribution activities, water sourcing and disposal, air emissions, discharges or releases of pollutants or wastes, storage, plugging and abandonment of wells, maintenance and decommissioning of other facilities, the spacing of wells, unitization and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and natural gas wells below actual production capacity to conserve supplies of oil, natural gas and NGLs. More recently, certain state agencies have implemented seismic-response measures and permitting constraints that affect produced-water injection and related recycling, which can curtail drilling and completion cadence on or around our acreage.

In addition, the production, handling, storage, gathering and transportation of oil, natural gas and NGLs as well as the remediation, emission and disposal of oil, natural gas and NGLs wastes, by-products thereof and other substances and materials produced or used in connection with oil, natural gas and NGLs operations are subject to regulation under federal, state and local laws and regulations primarily relating to protection of worker safety and health, natural resources and the environment. Failure to comply with these laws and regulations may result in the assessment of sanctions on our customers, including administrative, civil or criminal penalties, permit, license or authorization revocations or suspensions, requirements for additional pollution controls, imposition of cleanup and site restoration costs and liens, and injunctions limiting or prohibiting some or all of our customers’ operations on our properties. Moreover, these laws and regulations have generally imposed increasingly strict requirements related to water use and disposal, air pollution control, species protection and waste management, among other matters.

Laws and regulations governing E&P activities may also affect production levels. Certain of our customers must comply with federal, state and local laws and regulations governing conservation matters, including:

 

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provisions related to the unitization or pooling of oil and natural gas properties;

 

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the establishment of maximum rates of production from wells;

 

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the spacing of wells;

 

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the plugging and abandonment of wells; and

 

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the removal of related production equipment.

Additionally, federal and state regulatory authorities may expand or alter applicable pipeline-safety laws and regulations. The Pipeline and Hazardous Materials Safety Administration has completed several regulatory actions over the last few years, consistent with the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2020, which significantly expanded reporting and safety requirements for operators of gas gathering pipelines, including previously unregulated pipelines. Compliance with such regulations may require increased capital costs for third-party oil, natural gas and NGLs transporters. These transporters may attempt to pass on such costs to our customers, which in turn could affect the profitability of our surface acreage. Our customers must also comply with laws and regulations prohibiting fraud and market manipulations in energy markets. To the extent our customers are shippers on interstate pipelines, they must comply with the tariffs of those pipelines and with federal policies related to the use of interstate capacity.

Moreover, under certain environmental laws that impose strict as well as joint and several liability, we may be required to remediate contaminated properties owned by us even if a customer’s operations caused the contamination. In addition, our customers may be liable for the remediation of contamination at currently or formerly operated facilities and facilities of third parties that received waste generated by our customers’ operations, regardless of whether such contamination resulted from the conduct of others or from consequences of actions that were in compliance with all applicable environmental laws at the time those actions were taken. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, safety and health impacts of the operations of our customers. While we seek to mitigate any potential liability we may have through indemnification, customary insurance policies and remediation activities, in each case, required under our contracts, as well as reliance on state funded programs (such as the Texas Railroad Commission’s (the “TRRC”) Orphan Well Program) for coverage of plugging and abandonment liabilities, if any of our customers declared bankruptcy or if our insurance policies did not fully cover such liabilities, we may not be fully protected. Additionally, although we generally have rights to inspect our property and the operations thereon, we may not become aware of all environmental, safety and health matters. The trend of more expansive and stringent environmental legislation and regulations applied to extractive industries, such as those in which our customers engage, could continue, resulting in increased costs of doing business and consequently affecting profitability. To the extent laws are enacted or other governmental actions are taken that restrict our customers’ operations or impose more stringent and costly operating requirements, our customers’ operations could face increased costs and potential curtailment of operations, which consequently could indirectly materially and adversely affect our business, cash flows, prospects, financial condition or results of operations. Please read “Business—Regulation of Environmental and Occupational Safety and Health Matters” for a description of the laws and regulations that affect our customers and that may affect us.

Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could cause certain of our customers to incur increased costs, additional operating restrictions or delays and a reduction in potential drilling locations. Any such impacts could, in turn, reduce activity levels and related payments on or around our surface acreage.

Certain of our customers engage in hydraulic fracturing. Hydraulic fracturing is an important and common practice that is used to stimulate production of oil, natural gas and NGLs from dense subsurface rock formations. The process involves the injection of water, sand or alternative proppant and chemicals under pressure into targeted geological formations to fracture the surrounding rock and stimulate production. We do not operate our customers’ wells and therefore have limited ability to influence their compliance with evolving hydraulic fracturing requirements.

 

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Currently, hydraulic fracturing (other than that using diesel) is generally exempt from regulation under the Underground Injection Control (“UIC”) program of the U.S. Safe Drinking Water Act (the “SDWA”) and is typically regulated by state oil and gas commissions or similar agencies. While our customers engaged in hydraulic fracturing do not currently use diesel fuels in their hydraulic fracturing fluids, they may become subject to federal permitting under the SDWA if their fracturing formula changes and may incur significant costs to comply with disposal requirements for hydraulic fracturing fluids and produced water. In addition, the U.S. Congress (“Congress”) from time to time has considered legislation to amend the SDWA to remove the exemption currently available to hydraulic fracturing, which would place additional regulatory burdens on hydraulic fracturing operations including requirements to obtain a permit prior to commencing operations adhering to certain construction requirements, to establish financial assurance and to require reporting and disclosure of the chemicals used in those operations. If enacted, these changes could require permit acquisition prior to completions, redesign of job plans and equipment, and extended timelines to obtain or modify authorizations. This legislation has not been enacted.

Several federal agencies have asserted regulatory authority over certain aspects of the process. For example, the U.S. Environmental Protection Agency (the “EPA”) has published an effluent limit guideline final rule prohibiting the discharge of wastewater from onshore unconventional oil and gas extraction facilities to publicly owned wastewater treatment plants. In addition, the BLM finalized two rules in April and May 2024, increasing royalty rates, rentals and minimum bids, and updating the agency’s interpretation of its mandate that conservation is a use of federal land on par with mineral extraction and other uses (“Public Lands Rule”). In September 2025, the Department of the Interior announced its proposal to rescind the Public Lands Rule. Further, in May 2025, the BLM announced a policy designed to expedite the oil and gas leasing process on public lands. In July 2025, the One Big Beautiful Bill Act (“OBBB Act”) was signed into law, which included provisions directing expanded and expedited oil and gas leasing, removing restrictions on leasing and decreasing the royalty rate. Also, from time to time, legislation has been introduced, but not enacted, in Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process. Agency actions and legislative initiatives can be subject to judicial challenges, stays or reversals, creating uncertainty around timing and compliance obligations for operators planning completions.

Moreover, some states, including Texas, have adopted, and other states are considering adopting, regulations that restrict or could restrict hydraulic fracturing in certain circumstances and that require the disclosure of the chemicals used in hydraulic fracturing operations. Further, state and local governmental entities have exercised the regulatory powers to regulate, curtail or in some cases prohibit hydraulic fracturing. In addition to state laws, local land use restrictions, such as city ordinances, may restrict drilling in general and/or hydraulic fracturing in particular. Some jurisdictions have pursued set-back requirements, traffic and noise limitations, or ballot initiatives that effectively limit or preclude completions in proximity to populated or environmentally sensitive areas, which could reduce the number of economic locations near our acreage. Expanded disclosure mandates or registry reporting may also increase compliance costs and raise trade-secret and supply-chain considerations for our customers and their service providers.

Increased regulation and attention given to the hydraulic fracturing process, including the disposal of produced water gathered from drilling and production activities, could lead to greater opposition to, and litigation concerning, oil, natural gas and NGLs production activities using hydraulic fracturing techniques in areas where we own surface acreage and/or mineral and royalty interests. Permitting challenges under environmental review statutes and private litigation seeking injunctive relief can delay or disrupt drilling and completion schedules, which may defer or reduce surface-use payments to us. Additional legislation or regulation could also lead to operational delays or increased operating costs for our customers in the production of oil, natural gas and NGLs, including from the development of

 

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shale plays, or could make it more difficult for such customers to perform hydraulic fracturing. The adoption of any federal, state or local laws or the implementation of regulations regarding hydraulic fracturing could potentially cause a decrease in certain of our customers’ completion of new oil and natural gas wells on our properties and an associated decrease in the production attributable to our interests, which could have a material adverse effect on our business, financial condition and results of operations. In addition, tighter constraints on hydraulic fracturing or related water management could reduce demand for our water sales, ROWs and other surface services even where drilling continues.

Legislation or regulatory initiatives intended to address seismic activity, over-pressurization or subsidence could restrict drilling, completion and production activities, as well as our operating partners’ ability to handle produced water gathered from its customers, which could have a material adverse effect on our results of operations, cash flows and financial position.

Our operating partners handle produced water in connection with customers’ drilling and production operations pursuant to permits issued by governmental authorities overseeing such produced water handling activities. While these permits are issued pursuant to existing laws and regulations, these legal and regulatory requirements are subject to change, which could result in the imposition of more stringent permitting or operating constraints or new monitoring and reporting requirements, owing to, among other things, concerns of the public or governmental authorities regarding such produced water handling activities. For example, there exists a growing concern that the injection of produced water into certain produced water handling facilities triggers seismic activity in certain areas, including New Mexico and Texas, where our surface acreage is located. This has led to the creation of operator-led response plans in certain areas in New Mexico or Texas by the NMOCD and the TRRC, respectively, which can include the TRRC suspending or declining to issue produced water handling permits, restrictions on the amount of material that can be handled or requiring producers to cease disposal in certain produced water handling facilities and in areas within the vicinity of seismic events. Regulators may also require enhanced seismic monitoring, pressure management plans, maximum allowable surface pressures, volumetric caps, step-rate testing, or temporary shut-ins for produced water handling facilities in affected areas. Because we do not operate these facilities, our ability to ensure compliance or to mitigate resulting curtailments is limited, notwithstanding contractual rights and indemnities.

State and federal regulatory agencies are continuing to study the possible linkage between oil and natural gas activity and induced seismicity. The U.S. Geological Survey has identified Texas and New Mexico as two of six states with the most significant hazards from induced seismicity. In addition, a number of lawsuits have been filed in some states alleging that produced water handling operations have caused seismic events, caused damage to neighboring properties or otherwise violated state and federal regulations related to waste disposal. Adverse outcomes in such proceedings, or expanded enforcement, could result in injunctions, monetary penalties, mandatory facility modifications or shutdowns, and increased insurance and compliance costs. In response to these concerns, regulators in some states have imposed, or are considering imposing, additional requirements, including requirements regarding produced water handling permits, to assess the relationship between seismicity and the use of such produced water handling facilities. For example, the TRRC previously published a rule governing permitting or re-permitting of produced water handling facilities that would require, among other things, the submission of information on seismic events occurring within a specified radius of the produced water handling facility location, as well as logs, geologic cross sections and structure maps relating to the water handling area in question. On certain occasions, state regulatory agencies have suspended produced water handling facilities within the boundaries of certain SRAs. Although our acreage is not currently included in any SRA, there can be no assurance that all or a portion of our acreage will not be included in an SRA in the future. Separately, in November 2021, the NMOCD implemented protocols requiring producers to take various actions within a specified proximity of certain seismic activity, including a requirement to limit injection rates if a

 

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seismic event of a certain magnitude occurs within a specified radius of a produced water handling facility. Further, on July 11, 2024, the NMOCD announced the administrative cancellation of 75 pending permit applications for UIC Class II wells within the 10-mile County Line SRA, due to the potential for increased seismicity within the area. Constraints of this nature can accelerate shifts toward recycling and re-routing of produced water, potentially increasing costs for customers and reducing throughput or activity on or near our acreage. The adoption and implementation of any new laws or regulations that restrict our customers’ ability to handle produced water gathered from E&P companies, by limiting volumes, fees, produced water handling facility locations or otherwise, or requiring us to shut down produced water handling facilities, could limit existing operations and future development activity in affected areas by our customers, including Hydrosource, and reduce their demand for the use of our land, resources and water management solutions, which could have a material adverse effect on our results of operations, cash flows and financial position.

Additionally, studies have linked hydraulic fracturing related activities with subsidence and expansion. Both the injection of produced water into produced water facilities and the extraction of water, oil, natural gas or mineral resources from the ground can result in surface subsidence and uplifts caused by changes underground (such as, but not limited to, loss of volume and pressure depletion). Such changes underground have been linked to various geological and environmental hazards, such as alteration of local ecosystems and impacts upon local communities, including a potential increase in seismic activity and the formation of sinkholes. In response, agencies or local authorities may require geotechnical studies, elevation and microseismic monitoring, corrective action plans, bonding or mitigation, or impose site-specific restrictions on injection or extraction activities. Any new laws or regulations that may be adopted and implemented with respect to addressing subsidence and expansion risks may lead to restrictions upon our operations, which could have a material and adverse effect on our results of operations, cash flows and financial position. Even where continued operations are permitted, compliance obligations could delay projects, increase costs or reduce available pore space and ROWs, which may shift volumes and activity off our land.

Restrictions on the ability of our customers to obtain water may have an adverse effect on our financial condition, results of operations and cash flows.

Water is an essential component of oil, natural gas and NGLs production during both the drilling and hydraulic fracturing processes. Under many of our SUAs, customers are required to purchase from us or our operating partners the water used in their operations. We source water to fulfill our customers’ needs through a variety of rights and agreements, including the Recycled Water Supply Agreement and the Hydrosource Recycling Agreement. Additionally, our commercial water wells in New Mexico, water infrastructure in Texas and off-ranch water from third-party sources allow us to produce and sell in excess of 200 MMBbls of water per year. On certain areas of our ranches, our customers’ demand for water has exceeded our annual capacity over the last several years.

There can be no guarantee that we will have access to sufficient amounts of water to meet our customers’ needs. If our customers are unable to obtain water to use in their operations from local sources, or if our operators are unable to effectively utilize flowback water, they may be unable to economically drill for, or produce, oil, natural gas and NGLs from our properties, which could have an adverse effect on our financial condition, results of operations and cash flows.

Over the past several years, portions of Texas and New Mexico have experienced drought conditions. As a result of the droughts, some local water districts have begun restricting the use of water subject to their jurisdiction for hydraulic fracturing to protect local water supply. Such conditions may be exacerbated by climate change. Because we generate fee revenue by providing water to our customers, restrictions on the use of water for hydraulic fracturing or other oil and gas operations could have an adverse effect on our financial condition, results of operation and cash flows.

 

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Our reliance on revenue generated from water sales and produced water handling operations exposes us to potential financial and regulatory risks.

There are unique risks associated with handling produced water, and the legal requirements related to handling produced water into a non-producing geologic formation by means of produced water handling facilities are subject to change based on concerns of the public or governmental authorities. In particular, evolving seismic-response measures, pore-space access constraints, and pressure-management directives can limit injection options or require significant operational modifications, even for facilities that previously operated in compliance with permits. There remains substantial uncertainty regarding the handling of produced water by means of produced water handling facilities, the regulation of which could have a material and adverse effect on us, our operating partners or our customers in a manner that cannot be predicted due to such uncertainty. Moreover, not all of our commercial arrangements include minimum-volume commitments or they may be subject to caps or carve-outs, which limits protection against volume and timing risk if customers curtail or re-route water flows. These include liabilities related to the handling, treatment, storage, disposal, transport, release and use of radioactive materials, which could be in produced water, and uncertainties regarding the ultimate, and potential exposure to, technical and financial risks associated with modifying or decommissioning produced water handling facilities. Produced water and related residuals may contain naturally occurring radioactive material and technologically enhanced NORM hydrogen sulfide, or other constituents subject to evolving standards, and any reclassification of certain wastes or tightening of exposure limits could increase compliance and disposal costs and restrict available outlets. Federal or state regulatory agencies could require the shutdown of produced water handling facilities for safety reasons or refuse to permit the restart of any facility after unplanned or planned outages. Agencies may also mandate enhanced monitoring, bonding or financial assurance, corrective action plans, and expanded reporting, which can increase operating costs and extend restart timelines. New or amended safety and regulatory requirements may give rise to additional operational and maintenance costs and capital expenditures. In addition, increased third-party challenges to permits, seismic-event investigations, and citizen suits can delay approvals, impose interim operating limits, or result in permit revocations or narrowed authorizations. Additionally, aging equipment or facilities may require increased capital expenditures to keep produced water infrastructure operating efficiently or in compliance with applicable laws and regulations. Such equipment is also likely to require periodic upgrading and improvement to maintain compliance. Supply-chain constraints, long-lead times for critical components (including pumps, automation, and electrical gear), and grid-power availability can further delay repairs, expansions or recommissioning and increase costs. Although the safety record of produced water handling generally has been very good, accidents and other unforeseen problems have occurred and may occur in the future. Spills, releases or pipeline failures could trigger remediation obligations, third-party claims, regulatory enforcement, and interruption of service, and available insurance may be subject to exclusions, sublimits, higher retentions, or limited availability in affected markets. The consequences of any major incident could be severe and may result in loss of life or property damage. Further, cybersecurity incidents or operational technology failures affecting our operating partners’ systems could disrupt produced-water gathering, treatment and disposal activities, delay billing and settlement processes, and increase compliance and remediation costs. Any of these developments, or sustained reductions in handled volumes due to recycling, beneficial reuse or regulatory constraints, could materially and adversely affect our results of operations, cash flows and financial position.

 

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A series of risks arising out of the threat of climate change could result in increased operating costs for our customers, limit the areas in which oil, natural gas and NGLs production may occur, and reduce demand for traditional energy sources and the services related to the production and transport thereof, which could have a material adverse effect on their business, which in turn could have a material adverse effect on our business.

The operations of our customers and their service providers and end-line customers are subject to a series of regulatory, political, litigation and financial risks associated with the threat of climate change, including the production, processing, transportation, gathering and handling of traditional energy sources and the emission of greenhouse gases (“GHGs”). We do not operate our customers’ assets and have limited ability to influence their compliance or mitigation strategies.

At the federal level, no comprehensive climate change law or regulation has been implemented to date, though the Inflation Reduction Act of 2022 (“IRA 2022”) advances numerous climate related objectives, including funding and incentives for research and development of low-carbon energy production methods, carbon capture and other programs directed at addressing climate change. The IRA 2022 includes a methane emissions reduction program for petroleum and natural gas sources through a methane emissions fee. In November 2024, the EPA promulgated a rule implementing the methane emissions fee, although in February 2025, Congress voted to eliminate the rule under the Congressional Review Act. Additionally, in the OBBB Act, Congress delayed the implementation of the methane emission charge until 2034. We cannot predict if the Trump Administration and/or Congress may take further action to repeal or revise this requirement of the IRA 2022; however, compliance with this and other air pollution control and permitting requirements has the potential to delay the development of natural gas projects and increase our customers’ costs of development, which could be significant. Related legislative and agency actions are subject to change and legal challenge, creating planning uncertainty and potential delays for projects on or around our land.

In addition, the EPA has adopted new rules under the federal Clean Air Act (the “CAA”). In December 2023, the EPA issued a final rule that established Subpart OOOOb implementing more stringent rules for GHG (in the form of a limitation on emissions of methane) and volatile organic compound (“VOC”) emissions for new, modified and reconstructed facilities in the crude oil and natural gas source category and Subpart OOOOc as first-time existing source standards of performance for methane and VOC emissions for the oil and natural gas source category. However, in March 2025, the EPA announced plans to reconsider Subparts OOOOb and OOOOc, in line with the Trump Administration’s deregulatory agenda. In July 2025, the EPA extended the compliance deadlines for certain provisions provided in Subparts OOOOb and OOOOc. Litigation challenging EPA’s interim final rule extending such compliance deadlines for new and existing oil and gas sources remains pending. Even where certain deadlines have been extended, operators may still incur material monitoring, repair and equipment costs and face enforcement exposure.

Various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs and restriction of GHG emissions. Certain measures may also tighten air permitting or flaring limits, affecting completion timing and costs. Although it is not possible at this time to predict how new laws or regulations that may be adopted or issued to address GHG emissions would impact our business or our customers’ operations, any such future laws, regulations or legal requirements imposing reporting or permitting obligations on, or limiting emissions of GHGs from, our or our customers’ equipment and operations could require us or our customers to incur costs to reduce emissions of GHGs associated with operations, as well as delay or restrict the ability to permit GHG emissions from new or modified sources. In addition, substantial limitations on GHG emissions could adversely affect the demand for natural gas, oil and NGLs, which may also adversely affect our operations and financial results. Prolonged drought or flooding can

 

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constrain water sourcing, damage roads and ROWs and delay surface-use activities that generate our fees and royalties.

Furthermore, we and our customers have been and could be impacted in the future by the effects of weather volatility. Climate variability predictions have forecasted increases in the frequency and duration of droughts, extreme temperature variability, decreases in water supply and changes in water usage patterns, increases in the frequency and severity of extreme weather events (including storms, wildfires and other natural disasters) and the costs to reduce risks associated therewith and changes in meteorological and hydrological patterns, all of which could adversely impact our and our customers operations and involve various risks of physical damage. For example, in the winter of 2022, many oil and gas operators were impacted by abnormal winter conditions that temporarily adversely affected production. In addition, weather-related forced stoppages at processing, storage and pipeline facilities operated by our customers or counterparties with which our customers contract for services may also adversely affect our operations and financial results.

Increased attention to sustainability-related matters and conservation measures may impact our business or the business of our operators.

Increased attention to climate change, conflicting societal expectations on companies to address climate change and other environmental and social impacts, investor and societal expectations regarding voluntary sustainability disclosures and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our and our customers’ products and services, reduced profits, increased investigations and litigation and negative impacts on our or our customers’ suppliers and customers, which may ultimately have adverse impacts on our or our customers’ business, such as our and our customers’ access to the capital markets as well as the value of our Class A shares. Increased attention to climate change and environmental conservation, for example, may result in demand shifts from oil and natural gas products and services to alternative forms of energy outside the scope of our customers’ businesses. To the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to our and our customers’ causation of, or contribution to, the asserted damage, or to other mitigating factors.

Some organizations that provide information to investors on corporate governance and related matters have developed rating and proxy voting recommendation processes for evaluating companies on their approach to sustainability concerns. Such ratings and proxy advisory services are used by some investors to inform their investment and voting decisions. While such ratings do not impact all investors’ investment or voting decisions, unfavorable ratings and any activism directed at shifting funding away from companies with traditional energy-related assets could lead to increased negative investor sentiment toward us, our customers and our industry as a whole and to the diversion of investment to other industries, which could have a negative impact on our access to, and costs of, capital. Several states either proposed or passed new laws requiring additional disclosure from proxy advisory firms concerning factors influencing their proxy advisory services, especially when those factors extend beyond traditional financial or pecuniary analyses (such as sustainability matters). These new or proposed laws face legal challenges, including Texas SB 2337 providing public companies headquartered or domiciled (or considering redomiciling) in Texas with such additional protections, but enforcement of which by the Texas Attorney General has been enjoined by the U.S. District Court for the Western District of Texas pending trial. Further, institutional lenders may, of their own accord, decide not to provide funding for traditional energy companies based on climate change related concerns, which could affect our or our customers’ access to capital for operations. Additionally, insurers may decide to raise rates and/or cease insuring us or our customers based on climate change-related concerns.

 

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Additionally, certain public statements with respect to sustainability matters, such as emissions reduction goals, other environmental targets, or other commitments addressing certain social issues, are becoming increasingly subject to heightened scrutiny from public and governmental authorities, as well as other parties, related to the risk of potential “greenwashing,” in other words, misleading information or false claims overstating potential benefits. Any alleged claims of greenwashing against us or others in our industry may lead to further negative sentiment and diversion of investments.

Certain employment practices and social initiatives are the subject of scrutiny by both those advocating for the continued advancement of such policies, as well as those who believe they should be curbed, including government actors, and the complex regulatory and legal frameworks applicable to such initiatives continue to evolve. We cannot be certain of the impact of such regulatory, legal and other developments on our business. More recent political developments could mean that we face increasing criticism or litigation risks from certain anti-sustainability parties, including various governmental agencies. Consideration of sustainability-related factors in our decision-making could be subject to increasing scrutiny and objection from such anti-sustainability parties. As a result, we may face increased litigation risk from private parties and governmental authorities related to our sustainability-related efforts.

The 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, which could have a material adverse effect on our business, results of operation, cash flows and financial position.

Concerns over the risk of climate change have increased the focus by global, regional, national, state and local regulators on GHG emissions, including carbon dioxide emissions, and on transitioning to a lower-carbon future. A number of countries and states have adopted, or are considering the adoption of, regulatory frameworks to reduce GHG emissions. These regulatory measures may include, among others, adoption of cap-and-trade regimes, carbon taxes, increased energy efficiency standards, prohibitions or reductions on the sales of new automobiles with internal combustion engines, and tax credits, incentives or mandates for battery-powered automobiles and/or wind, solar or other forms of alternative energy. These include laws such as the IRA, which appropriates significant federal funding for renewable energy initiatives and amends the federal CAA to impose a first-time fee on the emission of excess methane from sources required to report their GHG emissions to the EPA. In May 2024, the EPA issued a final rule to implement the IRA’s 2022 methane fee, however, on March 14, 2025, a joint Congressional resolution disapproved the EPA’s 2024 rule, and the rule is no longer in effect. While the future implementation or repeal of all or a portion of the IRA is uncertain at this time, it is possible that additional changes in the future could impact our results of operation and those of our customers. Compliance with changes in laws, regulations and obligations relating to climate change could result in increased costs of compliance for our customers on or around our land or costs of consuming oil and natural gas for such products, and thereby reduce demand for the use of our land and resources, which could reduce our profitability. Changes in laws and regulations may also result in delays or increased costs associated with obtaining permits needed for oil and natural gas operations. Additionally, our customers on or around our land could incur reputational risk tied to changing customer or community perceptions of our customers’ or their customers’ contribution to, or detraction from, the transition to a lower-carbon economy. These changing perceptions could lower demand for oil and natural gas products, resulting in lower prices and lower revenues as consumers avoid carbon-intensive industries, and could also pressure banks and investment managers to shift investments and reduce lending.

Separately, banks and other financial institutions, including investors, may decide to adopt policies that restrict or prohibit investment in, or otherwise funding, us or our customers on or around our land based on climate change-related concerns, which could affect our and our customers on or around our land’s access to and cost of capital for potential growth projects. This trend is, however,

 

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generally declining. Additionally, insurers may decide to raise rates and/or cease insuring us or our customers on or around our land based on climate change-related concerns.

Approaches to climate change and transition to a lower-carbon economy, including government regulation, company policies and consumer behavior, are continuously evolving. For example, in October 2023, the State of California adopted several laws that require disclosure on various climate risks, targets, and metrics; however, both laws are currently subject to litigation. Any such disclosure or other climate-related requirements like these laws or similar that we may become subject to could require us or our customers to incur significant costs and additional attention from management, including for the establishment of additional controls, given the relatively novel nature of such reporting. At this time, we cannot predict how such approaches may develop or otherwise reasonably or reliably estimate their impact on us or our customers’ financial condition, results of operations and ability to compete. However, any long-term material adverse effect on the oil and natural gas industry may affect our results of operations, cash flows and financial position.

Our business and financial results could be disrupted by natural or human causes beyond our control.

Our business and financial results could be disrupted by natural or human causes beyond our control. Our revenues depend on natural and environmental conditions affecting operations that result in royalties and utilize our water services, many of which occur on or around our acreage in the Permian Basin. As a result, our business is subject to disruption from natural or human causes beyond our control, including severe storms, flooding, tornadoes, drought and aquifer declines, wildfires, earthquakes (including induced seismicity), system failures and power outages, pipeline disruptions, environmental incidents such as oil and produced-water spills, accidents, terrorism or sabotage, civil unrest, political events, war and epidemics or pandemics. Any of these events could cause material adverse effects on oil and natural gas production and associated infrastructure on or adjacent to our land, which in turn could negatively impact our results of operations, cash flows and financial position. Our geographic concentration in the Permian Basin heightens exposure to regional weather, natural disaster and infrastructure constraints relative to diversified operators.

Physical and regulatory responses to induced seismicity in Texas and New Mexico can disrupt produced-water handling and curtail activity on or near our acreage, including through SRA measures such as suspensions, volumetric limits and rate restrictions for injection. In July 2024, the NMOCD administratively canceled 75 pending UIC Class II permit applications within the 10-mile County Line SRA due to seismicity concerns, and the TRRC has pursued initiatives since 2021 to reduce injection volumes and suspend certain deep injection within SRAs. Although our acreage is not currently within an SRA, there is no assurance this will remain the case, and similar or expanded actions could constrain injection alternatives near our land, increase competition for pore space, and shift volumes away from locations that generate royalties for us. In addition, our customers’ ability to conduct activity that generates our revenues depends on access to adequate water supply and pore space and on timely permits for water sourcing, produced-water handling, air emissions and surface-disturbing construction. Prolonged drought, overuse of aquifers, habitat protections and local water-district restrictions can limit availability or increase costs, and heightened regulatory scrutiny can delay, limit or revoke permits, all of which can disrupt operations and payments to us. 

Broader operational, supply-chain and power-system disruptions affecting our customers and operating partners can reduce activity levels on or near our land and delay projects that generate surface-use fees, water sales and produced-water royalties. Our indirect exposure to construction, operational and environmental hazards, including fires, explosions, blowouts, seismic events, pipeline failures and spills or releases, as well as cybersecurity risks to energy infrastructure and third-party systems, can cause interruptions, remediation obligations, investigations, penalties, third-party claims

 

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and increased insurance and compliance costs; insurance may have deductibles, exclusions and sublimits, may not cover all interruptions, and proceeds may be delayed or insufficient. Evolving climate-related physical risks, including increased frequency and severity of storms, droughts, wildfires, flooding and extreme temperature variability, and associated resilience costs may constrain water sourcing, damage infrastructure and increase downtime at midstream and power assets utilized by our customers, reducing the activity levels that drive our revenues.

Current and future restrictions on our customers’ operations intended to protect certain species of wildlife may adversely affect their ability to expand certain existing operations and/or limit their ability to use our land, including the limitation of drilling activities, development of infrastructure and disposal operations.

In the United States, the Endangered Species Act (the “ESA”) and comparable state laws were established to protect endangered and threatened species. Pursuant to the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species’ habitat. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act (the “MBTA”). These measures may include seasonal timing restrictions, buffer zones, survey and monitoring obligations, and participation in Habitat Conservation Plans or Candidate Conservation Agreements with Assurances. To the extent species that are listed or protected under the ESA or the MBTA, respectively, or similar state laws live in the areas where we own surface acreage and/or mineral and royalty interests and our customers operate, our customers’ abilities to conduct or expand operations could be limited, or our customers could be forced to incur material additional costs. Because we do not control our customers’ operations, our ability to influence their compliance approach or mitigation strategy is limited. For example, in May 2024, the U.S. Fish and Wildlife Service (“FWS”) issued a final rule listing the dunes sagebrush lizard as endangered under the ESA, although that listing decision has been challenged. In November 2022, the FWS formally listed two distinct population segments of the lesser prairie-chicken under the ESA, but in March 2025, the U.S. District Court for the Western District of Texas vacated the rule for the northern district population segment. In April 2024, the FWS and the National Marine Fisheries Service (“NMFS”) finalized three rules that revise regulations for classifying species and designating critical habitat, interagency cooperation and protecting endangered and threatened species. In April 2025, the FWS and the NMFS proposed a rule to rescind the regulatory definition of “harm” to species under the ESA, which includes habitat modification. In addition, in April 2025, the U.S. Department of the Interior reinstated a 2017 legal opinion that determined that the MBTA’s prohibitions on pursuing, hunting, taking, capturing and killing migratory birds do not apply to accidental or incidental taking or killing of migratory birds. Agency policies and judicial decisions in these areas have shifted over time, and certain states maintain their own incidental-take prohibitions, creating additional uncertainty and potential compliance obligations.

The identification or designation of previously unprotected species, or the redesignation of a species from threatened to endangered, in areas on or around our land and/or mineral and royalty interests could cause our customers’ operations to become subject to operating restrictions or bans, including restrictions of future development activities in the subject areas, or cause our customers to incur additional costs associated with their operations on our surface acreage or with respect to our mineral and royalty interests, which could have a material adverse effect on our results of operations, cash flows and financial position. Critical habitat designations and federal “consultation” requirements where a federal nexus exists can further delay permits and require compensatory mitigation (including conservation banking or off-site habitat projects), which may limit activity on or near our acreage.

 

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Risks Related to Our Financial Condition

We 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.

As of December 31, 2025, on an actual basis, we had $265.6 million of total debt outstanding, exclusive of $35.1 million of unamortized debt premium (discount) and issuance costs, net, and on a pro forma, as adjusted basis, we had no debt outstanding and $1.8 million of unamortized debt issuance costs. Our ability to make scheduled payments on, or to refinance, our indebtedness and financial commitments depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions, including financial, business and other factors beyond our control, and may vary significantly from year to year. As a result, the amount of debt that we can manage in some periods may not be appropriate for us in other periods and we may be unable to generate sufficient cash flow to permit us to pay the principal, premium, if any, and interest on our indebtedness. Any insufficiency may impact our business.

If our cash flows and capital resources are insufficient to fund debt and other obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek to raise additional capital or refinance or restructure our indebtedness. Our ability to restructure or refinance indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of indebtedness could be on unfavorable terms, including at higher interest rates, and may require us to comply with more restrictive covenants. The terms of our existing or future debt instruments may restrict us from adopting some of these alternatives. We cannot assure you that any refinancing or restructuring would be possible, that any assets, including land, could be sold or that, if sold, the timing of the sales and the amount of proceeds realized from those sales would be favorable to us or that additional financing could be obtained on favorable terms, if at all. In addition, any failure to service our debt, including paying interest or principal on a timely basis, would likely result in a reduction of our credit rating, if any, which could harm our ability to incur additional indebtedness. In addition, if we fail to comply with the covenants or other terms of any agreements governing our debt, our lenders will have the right to accelerate the maturity of that debt and foreclose upon the collateral, if any, securing that debt.

Our indebtedness could have important consequences for you and significant effects on our business, including:

 

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increasing our vulnerability to adverse changes in general economic, industry and competitive conditions and limiting our ability to address such changes;

 

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requiring us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund general company and other purposes, including capital expenditures and dividend payments;

 

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restricting us from exploiting business opportunities and making strategic land acquisitions;

 

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making it more difficult to satisfy our financial obligations, including payments on our indebtedness, and contractual and commercial commitments;

 

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disadvantaging us when compared to our competitors that have less debt;

 

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complying with covenants contained in the documents governing such indebtedness may require us to meet or maintain certain financial tests, which may affect our flexibility in planning for, and reacting to, changes in our industry, such as being able to take advantage of acquisition opportunities when they arise; and

 

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increasing our borrowing costs or otherwise limiting our ability to borrow additional funds for the execution of our business strategy.

 

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Finally, the agreements governing our outstanding indebtedness limit our ability to incur additional debt, but such agreements do not prohibit us from doing so. As a result, we could incur more indebtedness in the future, which would exacerbate the foregoing risks.

We are subject to interest rate risk, which may cause our debt service obligations to increase significantly.

If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even if the amount borrowed remained the same, and we would be required to devote more of our cash flow to servicing our indebtedness.

In March 2022, the Federal Reserve began, and continued through 2023, to raise interest rates in an effort to curb inflation. Although the Federal Reserve reduced benchmark interest rates three times in 2025, to the extent such rates remain elevated, we may continue to experience further financing cost increases if interest rates on borrowings, credit facilities and debt offerings increase compared to previous levels. Changes in interest rates, either positive or negative, may also affect the yield requirements of investors who invest in our Class A shares, and the elevated interest rate environment could have an adverse impact on the price of our Class A shares or our ability to issue equity or incur debt for acquisitions or other purposes.

We anticipate entering into a new credit facility following this offering that we expect will be secured by substantially all of the assets of OpCo and its subsidiaries. If we fail to comply with the restrictions and covenants in such 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 and the potential loss of those assets.

We anticipate that we will use a portion of the net proceeds from this offering to repay in full, and terminate, the Predecessor Credit Facility. Following the completion of this offering, we anticipate that OpCo and certain of our other subsidiaries will enter into a new senior secured revolving credit facility (the “Credit Facility”) providing up to $200.0 million in revolving credit commitments, which will be administered by JPMorgan Chase Bank, N.A. The obligations under the Credit Facility will be secured by a first-priority lien on substantially all of the assets of OpCo and the Guarantors (as defined therein), including equity interests in the subsidiaries of OpCo, subject to customary exceptions and exclusions, and will be guaranteed by all material existing and future direct and indirect wholly owned domestic subsidiaries of OpCo. As a result, substantially all of our acreage, which as of December 31, 2025 consisted of approximately 236,000 surface acres across Texas and New Mexico, and our other assets, including our interests in our water infrastructure and other property, will be encumbered by first-priority mortgages (deeds of trust) and related security interests to secure the Credit Facility.

The Credit Facility will contain certain customary affirmative and negative covenants, which, among other things, will restrict the ability of OpCo and its restricted subsidiaries, subject to certain exceptions, to incur debt, grant liens, make restricted payments and investments, issue equity, sell or lease assets, dissolve or merge with another entity, enter into transactions with affiliates or restrictive agreements, change their business, prepay debt and amend their organizational documents and material agreements. In addition, OpCo will be required to comply with certain financial maintenance covenants, including a maximum net total leverage ratio of no greater than 3.50x (with maximum cash netting of up to $25.0 million if any loans are outstanding; if no loans are outstanding, all unrestricted cash and cash equivalents on the balance sheet of OpCo and its restricted subsidiaries and with a step up to 4.00x for a certain period after a material permitted acquisition) and a minimum interest coverage ratio of at least 2.75x. The Credit Facility will also contain customary events of default, including the failure of OpCo and the other loan parties to comply with the various financial, negative and affirmative covenants under the Credit Facility, subject to the cure provisions set forth therein. It will also include a customary holding company covenant applicable to us.

 

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A breach of compliance with any restriction or covenant in the Credit Facility or any of our future debt agreements could result in a default under the terms of the applicable agreement, and our ability to comply with such restrictions and covenants may be affected by events beyond our control, including prevailing economic and competitive conditions, changes in commodity prices, changes in law and regulation, and other factors affecting the energy sector. As a result, we cannot assure you that we will be able to comply with these restrictions and covenants. A default could result in acceleration of the indebtedness and a declaration of all amounts borrowed due and payable, which could have an adverse effect on us and negatively impact our ability to borrow. Because the Credit Facility will be secured by substantially all of the assets of OpCo and its subsidiaries, in the event of an event of default, the administrative agent may, with the consent of or at the direction of the required lenders, terminate the commitments and declare all outstanding loans and accrued interest and fees under the Credit Facility to be immediately due and payable. In addition, the administrative agent may enforce its security interests over OpCo and its subsidiaries assets that secure the obligations under the Credit Facility, take control of such assets and business, force us, OpCo and its subsidiaries to seek bankruptcy protection, or force us, OpCo or its restricted subsidiaries to curtail or abandon our or their current business plans. The loss of such assets, which constitute substantially all of our property, including the surface acreage and water infrastructure that generate our revenues, would have a material adverse effect on our business, results of operations, cash flows and financial position and could result in the loss of all, or a part of, your investment in our Class A shares.

If an acceleration occurs, OpCo may be unable to make all of the required payments and may be unable to find alternative financing. Even if alternative financing were available at that time, it may not be on terms that are favorable or acceptable to us, including as a result of higher interest rates or more restrictive covenants. Additionally, we may not be able to amend the Credit Facility or such future agreements governing our indebtedness or obtain necessary waivers on satisfactory terms. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time, and any refinancing of our indebtedness could be on unfavorable terms.

Our obligations under the Credit Facility will be secured by a first priority security interest in substantially all of the assets of OpCo and its restricted subsidiaries.

We expect that amounts borrowed pursuant to the terms of the Credit Facility will be secured by substantially all of OpCo’s and its restricted subsidiaries’ present and after-acquired assets. Additionally, we expect that the obligations under the Credit Facility will be jointly and severally guaranteed by OpCo and its material subsidiaries.

As a result of the above, in the event of the occurrence of a default under the Credit Facility, the administrative agent may enforce its security interests (for the ratable benefit of the lenders under the Credit Facility and the other secured parties) over OpCo’s and/or its restricted subsidiaries’ assets that secure the obligations under the Credit Facility, take control of such assets and business, force us, OpCo or its restricted subsidiaries to seek bankruptcy protection, or force us to curtail or abandon our current business plans. If that were to happen, you may lose all, or a part of, your investment in our Class A shares.

Changes to applicable tax laws and regulations, exposure to additional income tax liabilities, changes in our effective tax rates or an assessment of taxes resulting from an examination of our income or other tax returns could adversely affect our results of operations, cash flows and financial position, including our ability to repay our debt.

We are subject to various complex and evolving U.S. federal, state and local taxes. U.S. federal, state and local tax laws, policies, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us, in each case, possibly with retroactive effect, and may have an adverse effect on our results of operations, cash flows and financial position, including our

 

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ability to repay our debt. The passage of tax legislation or other similar changes in U.S. federal income tax laws could adversely affect our results of operations, cash flows and financial position.

Changes in our effective tax rates or tax liabilities could also adversely affect our results of operations, cash flows and financial position. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

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changes in the valuation of our deferred tax assets and liabilities;

 

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expected timing and amount of the release of any tax valuation allowances;

 

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expansion into future activities in new jurisdictions;

 

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the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities; and

 

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tax effects of share-based compensation.

In addition, an adverse outcome arising from an examination of our income or other tax returns could result in higher tax exposure, penalties, interest or other liabilities that could have an adverse effect on our results of operations, cash flows and financial position.

We 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.

We are subject to the risk of loss resulting from nonpayment or nonperformance by our customers of their respective obligations. Although we maintain policies and procedures to limit such risks, our credit procedures and policies may not be adequate to fully eliminate customer credit risk. If we fail to adequately assess the creditworthiness of existing or future customers or unanticipated deterioration in their creditworthiness, any resulting increase in nonpayment or nonperformance by them of their respective obligations and our inability to collect on outstanding receivables or find substitute customers could have an adverse effect on our results of operations, cash flows and financial position. A decline in oil and natural gas prices could negatively impact the financial condition of our customers and sustained lower prices could impact their ability to meet their obligations to us. Further, our contract counterparties may not perform or adhere to our existing or future contractual arrangements. To the extent one or more of our contract counterparties is in financial distress or commences bankruptcy proceedings, contracts with these counterparties may be subject to renegotiation or rejection under applicable provisions of the Bankruptcy Code. Any material nonpayment or nonperformance by our contract counterparties due to inability or unwillingness to perform or adhere to contractual arrangements could adversely affect our results of operations, cash flows and financial position.

We have a history of, and plan for, significant financing transactions; our capital structure includes significant indebtedness the terms of which may constrain us, and we intend to use offering proceeds to repay indebtedness.

We have incurred and amended material debt facilities to fund acquisitions and operations, including a $72.0 million term loan and a revolving credit facility and a subsequent $204.0 million term financing tied to the Accelerated Acquisition; indebtedness and related covenants may limit flexibility and increase refinancing risk. The incurrence of additional indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire additional acreage and other operating restrictions that could adversely impact our ability to conduct our business and may result in liens being placed on our assets. If we were to default on such indebtedness, we could lose such assets. The use of initial public offering proceeds to repay the Predecessor Credit Facility reduces cash available for operations and growth and increases our exposure to market conditions at pricing.

 

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Risks Related to this Offering, Our Corporate Structure and Our Class A Shares

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act, may increase our costs and divert management’s attention from other business concerns, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, we will need to comply with new laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act, related regulations of the SEC and the NYSE and NYSE Texas rules, with which we are not required to comply as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and will significantly increase our costs and expenses. We will need to:

 

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institute a more comprehensive compliance function;

 

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comply with rules promulgated by the NYSE and NYSE Texas;

 

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prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;

 

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accurately implement and interpret GAAP;

 

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institute and enforce new internal policies, such as those relating to insider trading; and

 

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involve and retain to a greater degree outside counsel and accountants in the above activities.

Upon becoming a reporting issuer, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reporting. Although we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal controls over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. Additionally, we are not required to have our independent registered public accounting firm attest to the effectiveness of our internal controls until our first annual report subsequent to our ceasing to be an “emerging growth company” or a “smaller reporting company” under the applicable federal securities laws. Accordingly, we may not be required to have our independent registered public accounting firm attest to the effectiveness of our internal controls until as late as our annual report for the fiscal year ending December 31, 2031, if we are no longer a “smaller reporting company.” Once it is required to do so, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, operated or reviewed. Compliance with these requirements will strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

In addition, we expect that being a public company subject to these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

 

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Investors in this offering will experience immediate and substantial dilution of $15.50 per Class A share.

The initial public offering price of $18.50 per Class A share (the mid-point of the price range set forth on the cover page of this prospectus) exceeds our pro forma, as adjusted net tangible book value of $3.00 per Class A share. Based on the assumed initial public offering price of $18.50 per Class A share, shareholders will incur an immediate and substantial dilution of $15.50 per Class A share in the as adjusted net tangible book value per share. This dilution results primarily because our assets are recorded at their historical cost in accordance with GAAP, and not their fair value. Please see “Dilution.”

Future sales of Class A shares, or the perception that such sales may occur, may depress our share price, and any additional capital raised through the sale of equity or convertible securities may dilute your ownership in us.

We 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.

In addition, we have granted registration rights to all of our Existing Owners and the TCW Entities which cover (i) all of the 105,164,580 Class B shares, and an equal number of OpCo Units, and (ii) all of the 4,560,785 Class A shares that they will own following this offering. Such Existing Owners and TCW Entities may exercise their rights under the registration rights agreement in their sole discretion, subject to certain restrictions, and sales pursuant to such rights may be material in amount and occur at any time. See “Certain Relationships and Related Party Transactions—Registration Rights Agreement.” The sales of substantial amounts of our Class A shares (including Class A shares underlying Class B shares held by the Existing Owners or the TCW Entities) or the perception that these sales may occur could cause the market price of our Class A shares to decline and impair our ability to raise capital. We also may grant additional registration rights in connection with any future issuance of our capital stock.

We cannot predict the size of future issuances of our Class A shares or securities convertible into or redeemable, exercisable or exchangeable for Class A shares or the effect, if any, that future issuances and sales of shares of our Class A shares will have on the market price of our Class A shares.

Our ability to pay dividends to our shareholders may be limited by our holding company structure, contractual restrictions and regulatory requirements.

After this offering, we will be a holding company and will have no material assets other than our equity interest in OpCo, and we will not have any independent means of generating revenue. To the extent OpCo has available cash we intend to cause OpCo to make (i) generally pro rata distributions to all OpCo Unitholders, including us, in an amount at least sufficient to allow us to pay taxes, (ii) at the election of certain OpCo Unitholders, additional distributions in an amount generally intended to allow such OpCo Unitholders to satisfy their respective income tax liabilities with respect to their allocable share of the income of OpCo (based on certain assumptions and conventions), which additional distributions may be made on a pro rata basis to all OpCo Unitholders (including us) or a non-pro rata basis to OpCo Unitholders (other than us) in redemption of OpCo Units from such holders and (iii) non-pro rata distributions to us in an amount sufficient to cover our public company and other overhead expenses. In addition, as the sole managing member of OpCo, we would expect to cause OpCo to make pro rata distributions to all of its unitholders, including to us, in an amount sufficient to allow us to fund dividends to our shareholders in accordance with our dividend policy, to the extent our board of directors declares any such dividend. OpCo, however, is a distinct legal entity and may be

 

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subject to legal or contractual restrictions that, under certain circumstances, may limit our ability to obtain cash from it. If OpCo is unable to make distributions, we may not receive adequate distributions, which could materially and adversely affect our results of operations, cash flows, financial position and ability to fund any dividends.

Although we expect to seek to pay dividends on our Class A shares, we are not obligated to do so. We have not adopted a formal written dividend policy nor have we adopted a dividend policy to pay a fixed amount of cash each quarter in respect of each Class A share or to pay an amount based on the achievement of, or amount derivable based on, any specific financial metrics. Any future dividends are within the absolute discretion of our board of directors. Our board of directors has not declared any dividends and may determine not to declare any dividends in the future. Our board of directors will take into account general economic and business conditions, our financial condition and results of operations, our cash flows from operations and current and anticipated cash needs, our capital requirements, legal, tax, regulatory and contractual restrictions, and implications of such other factors as our board of directors may deem relevant in determining whether, and in what amounts, to pay such dividends. In addition, our debt agreements may limit the amount of distributions that OpCo’s subsidiaries can make to OpCo and OpCo can make to us and the purposes for which distributions could be made. Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Pro Forma Liquidity and Capital Resources—Pro Forma Debt Instruments” for further discussion of our debt agreements. Accordingly, we may not be able to pay dividends even if our board of directors would otherwise deem it appropriate. Please see “Dividend Policy,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Pro Forma Liquidity and Capital Resources” and “Description of Shares.”

Any decision to pay cash dividends in the future will be made in the sole discretion of our board of directors. If we do not pay any cash dividends on our Class A shares following this offering, you may not receive a return on investment unless you sell your Class A shares for a price greater than that which you paid for them.

Any decision to declare and pay cash dividends in the future will be made in the sole discretion of our board of directors. We have not adopted a formal written dividend policy. In addition, our ability to pay cash dividends is, and may be, limited by covenants of any current or future outstanding indebtedness we or our subsidiaries incur. Any return on investment in our Class A shares may be solely dependent upon the appreciation of the price of our Class A shares on the open market, which may not occur.

For more information about these restrictions, see “Dividend Policy.” There can be no assurance that we will pay dividends in the future or continue to pay any dividends if we do commence paying dividends. Any decision to pay dividends will depend on many factors, including but not limited to our financial condition, earnings, capital requirements, contractual covenants, legal requirements, regulatory constraints, industry practice, ability to access capital markets and other factors deemed relevant by our board of directors. Investors in this offering should make any investment in our Class A shares without reliance on payment of any future dividend.

The Existing Owners have the ability to direct the voting of a majority of our common shares and control certain decisions with respect to our management and business. The Existing Owners’ interests may conflict with those of our other shareholders.

Upon completion of this offering, the Existing Owners will initially own an aggregate of 94,785,096 Class B shares representing 72.8% of our voting power (or 71.4% of our voting power if the underwriters’ option to purchase additional Class A shares is exercised in full). The Existing Owners may also purchase Class A shares through the directed share program, which would increase their voting power.

 

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The Existing Owners, by virtue of their director designation rights under the Shareholder’s Agreements and voting power under the Voting Agreements, each as described below, will be able to control matters requiring shareholder approval, including the election of directors, changes to our organizational documents, approval of acquisition offers and other significant corporate transactions. This concentration of ownership makes it unlikely that any other holder or group of holders of our Class A shares will be able to affect the way we are managed or the direction of our business. The interests of the Existing Owners with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other shareholders.

Furthermore, prior to the completion of this offering, we expect to enter into Shareholder’s Agreements with each of our Existing Owners, providing that our Existing Owners will have the right to designate members of our board of directors. Although none of our Existing Owners will be permitted to individually designate a majority of our board of directors, the terms of the Shareholder’s Agreements will result in the Existing Owners being able to collectively designate a majority of our board of directors for a potentially extended period of time following the completion of this offering. The Shareholder’s Agreements will provide, subject to compliance with applicable law and NYSE and NYSE Texas rules, for so long as any Existing Owner, and its affiliates and certain transferees, beneficially owns at least 30%, 20% and 10% of our outstanding common shares, such Existing Owner shall be entitled to designate three directors, two directors and one director, respectively, for nomination to our board of directors. If the size of the board of directors is increased or decreased from seven directors, each Existing Owner’s nomination rights will be proportionately adjusted. Of the directors designated by each of L&E and Double Eagle, at least two of each such Existing Owner’s designees (or if such Existing Owner is designating only one director, such designee) must qualify as “independent” for purposes of serving on the Audit Committee. So long as an Existing Owner is entitled to designate one or more directors and notifies the board of directors of its desire to remove, with or without cause, any director previously designated by it to the board, we are required to take all necessary action to cause such removal.

See “Certain Relationships and Related Transactions—Shareholder’s Agreements.”

Pursuant to separate Voting Agreements, each Existing Owner will agree with us that it and certain of its transferees will vote all of the common shares that it owns in favor of all director nominees recommended for election by our board of directors. As a result, investors in this offering have a limited ability to influence the direction of our business. See “Certain Relationships and Related Party Transactions—Voting Agreements.”

The Existing Owners’ substantial ownership of our common shares may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in the best interests of our company. Moreover, the Existing Owners’ concentration of share ownership may adversely affect the trading price of our Class A shares to the extent investors perceive a disadvantage in owning shares of a company with a significant shareholder.

In addition, the Existing Owners may have different tax positions from us that could influence their decisions regarding whether and when to support the disposition of assets and the incurrence or refinancing of new or existing indebtedness. In addition, the determination of future tax reporting positions, the structuring of future transactions and the handling of any challenge by any taxing authority to our tax reporting positions may take into consideration the Existing Owners’ tax or other considerations, which may differ from the considerations of our other shareholders.

 

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We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us.

We have historically entered into transactions with our operating partners, each of which will be an affiliate of ours following the completion of this offering. Related party transactions create the possibility of conflicts of interest. Although we have established certain policies and procedures designed to mitigate and resolve conflicts of interest, there can be no assurance that these policies and procedures will be effective in doing so. It is possible that a conflict of interest could have a material adverse effect on our liquidity, results of operations and financial condition.

Our Existing Owners and their respective affiliates are not limited in their ability to compete with us, and may benefit from opportunities that might otherwise be available to us.

Our LLC Agreement will provide that our officers and directors and their respective affiliates and our Existing Owners and their respective affiliates (each an “Unrestricted Party”), are not restricted from owning assets or prohibited from engaging in other businesses or activities, including those that might be in direct competition with us, and that we renounce any interest or expectancy in any business opportunity that may from time to time be presented to them that would otherwise be subject to a corporate opportunity or other analogous doctrine under the TBOC. In addition, the Unrestricted Parties may compete with us for investment opportunities and may own an interest in entities that compete with us. In particular, our LLC Agreement, subject to the limitations of applicable law, will provide, among other things, that (i) the Unrestricted Parties may conduct business that competes with us and may make investments in any kind of property in which we may make investments, and (ii) if any of the Unrestricted Parties acquire knowledge of a potential business opportunity, transaction or other matter, they have no duty, to the fullest extent permitted by law, to communicate such offer to us, our shareholders or our affiliates.

We may refer any conflicts of interest or potential conflicts of interest involving any of the Unrestricted Parties to a conflicts committee, which must consist entirely of one or more independent directors, for resolution. Additionally, we anticipate that our board of directors will adopt a written related party transactions policy relating to the approval of related party transactions, pursuant to which any such transactions, including transactions with the Unrestricted Parties, will be reviewed and approved or ratified by our Audit Committee or such conflicts committee or pursuant to the procedures outlined in any such policy.

Our Existing Owners may become aware, from time to time, of certain business opportunities (such as acquisition opportunities) and may direct such opportunities to other businesses in which they have invested, in which case we may not become aware of or otherwise have the ability to pursue such opportunities. Furthermore, such businesses may choose to compete with us for these opportunities, possibly causing these opportunities to not be available to us or causing them to be more expensive for us to pursue. Furthermore, our Existing Owners are not required to utilize facilities located on our land in connection with any business opportunities, whether currently existing or arising in the future, and may pursue development opportunities with competing landowners or pursue an alternative land position without informing us of such opportunity or offering such opportunity to us. This renouncing of our interest and expectancy in any business opportunity may create actual and potential conflicts of interest between us and our Existing Owners, and result in less than favorable treatment of us and our shareholders if attractive business opportunities are pursued by our Existing Owners, for their own benefit rather than for ours.

Additionally, our operating partners, which are affiliated with certain of the Existing Owners, may have interests that deviate from ours in the day-to-day operation of their respective businesses. For example, Double Eagle may sell the upstream assets that underlie the DE Acreage Dedication in the

 

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future in its discretion. If such a sale were to occur, pursuant to the terms of a put option agreement between Double Eagle and Hydrosource, Double Eagle has the right to sell, and Hydrosource has the obligation to purchase, DEF Operating. If Double Eagle exercises such put right, it would cease to be one of our operating partners and we would lose the benefits of that relationship. In addition, our other operating partner, Hydrosource, would become the owner of DEF Operating, which is the party to the DE Flow WSMA and the minimum royalty obligation thereunder. In addition, Double Eagle may exercise the put option at any time following five years from the date of this offering.

Certain provisions of the TBOC and our LLC Agreement provide additional protections for our officers, directors and affiliates and limit the ability of shareholders to bring derivative claims or submit proposals at our annual meeting. As a result, our shareholders may be disadvantaged as compared to shareholders of Delaware corporations.

Certain provisions of the TBOC and our LLC Agreement may make it more difficult for our shareholders to bring claims against us, our directors and officers, or to submit proposals for consideration at meetings of our shareholders, as compared to the rights typically available to shareholders of a Delaware corporation. For example, pursuant to our LLC Agreement, each shareholder has waived any right to trial by jury in any action, proceeding or counterclaim concerning claims, including derivative claims, that are based on, arise from, or are related to our internal affairs, including fiduciary duty breaches. In addition, our LLC Agreement provides that, in order to institute a derivative proceeding, a shareholder must beneficially own a number of shares equaling greater than 2.5% of our outstanding shares, which is in addition to the other requirements for derivative proceedings set forth in the TBOC. This ownership threshold is more restrictive than what is generally required under Delaware law to bring a derivative action. The aforementioned waiver of jury trial and derivative proceeding provisions would not apply to claims brought to enforce a duty or liability created by the Exchange Act or the Securities Act. Furthermore, the TBOC provides a presumption that a manager of a limited liability company acted on an informed basis, in good faith and with the honest belief that the action taken was in the best interests of the company, which may make it more difficult for shareholders to successfully challenge actions taken by our board of directors.

Additionally, pursuant to our LLC Agreement, no shareholder or beneficial owner of shares, or group of shareholders or beneficial owners of shares, may submit a matter for consideration at an annual or special meeting of our shareholders, other than director nominations and procedural resolutions that are ancillary to the conduct of the meeting, unless such shareholder, beneficial owner or group holds a number of common shares, determined as of the date of submission of the proposal, equal to at least (i) $1 million in market value or (ii) 3% of our outstanding common shares. Such shareholder, beneficial owner or group must also have held such number of common shares for a continuous period of at least six months before the date of the meeting, hold such common shares throughout the entire duration of the meeting and solicit the beneficial owners of Class A shares representing at least 67% of Class A shares entitled to vote on the proposal. These requirements are significantly more burdensome than the ownership thresholds applicable to shareholder proposals of Delaware corporations under SEC Rule 14a-8 and may effectively prevent many of our shareholders from submitting proposals for our annual meetings. These provisions of the TBOC and our LLC Agreement may discourage or make it more difficult for our shareholders to pursue legal claims or present proposals for shareholder action, which, taken together, could limit the ability of shareholders to influence our governance.

 

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Certain of our directors and officers may have significant duties with, and spend significant time serving, other entities, including entities that may compete with us in seeking acquisitions and business opportunities, and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.

Certain of our directors and officers, who are responsible for managing our business, may hold positions of responsibility with other entities, including those that are in the energy industry. The existing and potential positions held by these directors and officers may give rise to fiduciary or other duties that are in conflict with the duties they owe to us and may also otherwise require attention and time that could otherwise be devoted to our business. Although we expect that our directors and officers will initially spend a significant amount of their time on matters involving our business, we expect that they will also spend time on matters relating to other entities in which they are involved, including the Existing Owners. The ultimate allocation of our directors’ and officers’ time among us and such other entities will be subject to a variety of factors, including operational and business considerations. These directors and officers may become aware of business opportunities that may be appropriate for presentation to us as well as to the other entities with which they are or may become affiliated. Due to these existing and potential future affiliations, such directors and officers may present potential business opportunities to other entities prior to presenting them to us, which could cause additional conflicts of interest. They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and, as a result, they may elect not to present those opportunities to us. These conflicts may not be resolved in our or your best interests.

A significant reduction by the Existing Owners of their ownership interests in us could adversely affect us.

We believe that the Existing Owners’ ownership interest in us provides them with an economic incentive to assist us in being successful. Upon the expiration of the lock-up restrictions on transfers or sales of our securities following the completion of this offering, the Existing Owners will not be subject to any obligation to maintain their ownership interest in us and may elect at any time thereafter to sell all or a substantial portion of or otherwise reduce their ownership interest in us. If the Existing Owners sell all or a substantial portion of their ownership interests in us, they may have less incentive to assist in our success and its affiliate(s) that are expected to serve as members of our board of directors may resign. Such actions could adversely affect our ability to successfully implement our business strategies, which could adversely affect our results of operations, cash flows and financial position.

The U.S. federal income tax treatment of dividends on our Class A shares to a holder will depend upon our tax attributes and the holder’s tax basis in our Class A shares, which are not necessarily predictable and can change over time, and could cause taxable gain or loss on the sale of our Class A shares to be more or less than expected.

We have not adopted a formal written dividend policy. Dividend payments of cash or property to holders of our Class A shares, if any, will constitute “dividends” for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent such distribution amounts exceed our current and accumulated earnings and profits, such distributed amount will be treated as a non-taxable return of capital to the extent of a holder’s tax basis in our Class A shares and thereafter as capital gain from the sale or exchange of such shares.

If a holder sells its Class A shares, the holder will recognize a gain or loss equal to the difference between the amount realized and the holder’s tax basis in such Class A shares. To the extent that the amount of our dividends is treated as a non-taxable return of capital as described above, such dividends will reduce a holder’s tax basis in the Class A shares. Consequently, such excess dividends

 

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will result in a corresponding increase in the amount of gain, or a corresponding decrease in the amount of loss, recognized by the holder upon the sale of the Class A shares or subsequent dividends with respect to such shares. Please read “Material U.S. Federal Income Tax Considerations for Non-U.S. Holders—Gain on Sale or Other Taxable Disposition of Class A Shares” for a further discussion of the foregoing. Additionally, with regard to U.S. corporate holders of our Class A shares, to the extent that a dividend on our Class A shares exceeds both our current and accumulated earnings and profits and such holder’s tax basis in such shares, such holders would be unable to utilize the corporate dividends-received deduction (to the extent it would otherwise be applicable to such holder) with respect to the gain resulting from such excess dividend.

Prospective 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.

The Internal Revenue Service (“IRS”) Forms 1099-DIV that our shareholders receive from their brokers may over-report dividend income with respect to our Class A shares for U.S. federal income tax purposes, and failure to report dividend income in a manner consistent with the IRS Forms 1099-DIV may cause the IRS to assert audit adjustments to a shareholder’s U.S. federal income tax return. For non-U.S. holders of our Class A shares, brokers or other withholding agents may overwithhold taxes from dividends paid, in which case a shareholder generally would have to timely file a U.S. tax return or an appropriate claim for refund in order to claim a refund of the overwithheld taxes.

To the extent we make any payments of cash or property to holders of our Class A shares, such payments with respect to our Class A shares will constitute “dividends” for U.S. federal income tax purposes only to the extent of our current and accumulated earnings and profits. Dividends we pay in excess of our earnings and profits will not be treated as “dividends” for U.S. federal income tax purposes; instead, they will be treated first as a tax-free return of capital to the extent of a shareholder’s tax basis in their Class A shares and then as capital gain realized on the sale or exchange of such shares. We may be unable to timely determine the portion of our dividends that is a “dividend” for U.S. federal income tax purposes.

For a U.S. holder of our Class A shares, the IRS Forms 1099-DIV may not be consistent with our determination of the amount that constitutes a “dividend” for U.S. federal income tax purposes or a shareholder may receive a corrected IRS Form 1099-DIV (and may therefore need to file an amended federal, state or local income tax return). We will attempt to timely notify our shareholders of available information to assist with income tax reporting (such as posting the correct information on our website). However, the information that we provide to our shareholders may be inconsistent with the amounts reported by a broker on IRS Form 1099-DIV, and the IRS may disagree with any such information and may make audit adjustments to a shareholder’s tax return.

For a non-U.S. holder of our Class A shares, “dividends” for U.S. federal income tax purposes will be subject to withholding of U.S. federal income tax at a 30% rate unless an applicable income tax treaty provides for a lower rate or the dividends are effectively connected with conduct of a U.S. trade or business. Please read “Material U.S. Federal Income Tax Considerations for Non-U.S. Holders—Dividends and Other Distributions.” In the event that we are unable to timely determine the portion of our dividends that is a “dividend” for U.S. federal income tax purposes, or a shareholder’s broker or withholding agent chooses to withhold taxes from dividends in a manner inconsistent with our determination of the amount that constitutes a “dividend” for such purposes, a shareholder’s broker or other withholding agent may overwithhold taxes from dividends paid. In such a case, a shareholder generally would have to timely file a U.S. tax return or an appropriate claim for refund in order to obtain a refund of the overwithheld tax.

 

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The underwriters of this offering may waive or release parties to the lock-up agreements entered into in connection with this offering, which could adversely affect the price of our Class A shares.

We, all of our directors, all of our executive officers, the Existing Owners and the TCW Entities, and certain of their respective affiliates, will enter into lock-up agreements pursuant to which we and they will be subject to certain restrictions with respect to the sale or other disposition of our Class A shares or securities convertible into or redeemable, exercisable or exchangeable for Class A shares, including OpCo Units and Class B shares, for a period of 180 days following the date of this prospectus. Please see “Underwriting” for more information on these agreements. If the restrictions under the lock-up agreements are waived, then the Class A shares, subject to compliance with the Securities Act or exceptions therefrom, will be available for sale into the public markets, which could cause the market price of our Class A shares to decline and impair our ability to raise capital.

For 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.

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for “emerging growth companies,” including certain requirements relating to auditing standards and executive compensation disclosure. We are classified as an “emerging growth company” under the JOBS Act, and currently intend to take advantage of the following exemptions. For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things: (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; (iii) provide certain disclosures regarding executive compensation required of larger public companies; or (iv) hold nonbinding advisory votes on executive compensation. We currently intend to take advantage of the exemptions described above. We have also elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We will remain an emerging growth company for up to five years, although we will lose that status sooner if we have more than $1.235 billion of revenues in a fiscal year, have more than $700.0 million in market value of our Class A shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.

Additionally, we qualify as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K under the Securities Act. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, omitting certain executive compensation disclosure and providing only two years of audited financial statements in their periodic reports and registration statements. We will remain a smaller reporting company until the last day of the fiscal year in which: (i) the market value of our common shares held by non-affiliates is $250 million or more as of the end of that fiscal year’s second fiscal quarter; or (ii) our annual revenues are $100 million or more during such completed fiscal year and the market value of our common shares held by non-affiliates is $700 million or more as of the end of that fiscal year’s second fiscal quarter. To the extent we elect to take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

 

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To the extent that we rely on any of the exemptions available to emerging growth companies and/or smaller reporting companies, you will receive less information about our financial position, executive compensation and internal control over financial reporting than issuers that are not emerging growth companies or smaller reporting companies. Our election to rely on these exemptions may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of such exemptions. If some investors find our Class A shares to be less attractive as a result, there may be a less active trading market for our Class A shares and our Class A share price may be more volatile.

Because 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.

Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of this extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies. Accordingly, our financial statements may not be comparable to those of companies that comply with public company effective dates, and our shareholders and potential investors may have difficulty in analyzing our operating results by comparing us to such companies.

The market price of our Class A shares may be volatile or may decline regardless of our operating performance, which could cause the value of your investment to decline.

Even if a trading market develops, the market price of our Class A shares may be highly volatile and could be subject to wide fluctuations. Securities markets in general experience significant price and volume fluctuations that have often been unrelated to the operating performance of particular companies. As such, this market volatility, as well as general economic, market or political conditions, could reduce the value of our Class A shares regardless of our results of operations. In the past, following periods of volatility in the overall market and/or in the value of a company’s securities, securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

The trading market for our Class A shares will also depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us, the trading price for our Class A shares and other securities would be negatively affected. If such analysts do cover us, they may downgrade our Class A shares due to our operating results being below the expectations of such analysts and investors as a result of a number of potential factors, including variations in our quarterly operating results or dividends, if any, to holders of our Class A shares, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about the industries in which we participate or individual scandals, and in response the market price of our Class A shares could decrease significantly. The trading volume of our Class A shares may decline, and you may be unable to resell your shares of Class A shares at or above the initial public offering price.

 

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The initial public offering price of our Class A shares may not be indicative of the market price of our Class A shares after this offering. In addition, an active, liquid and orderly trading market for our Class A shares may not develop or be maintained, and our Class A share price may be volatile.

Prior to this offering, our Class A shares were not traded on any market. After this offering, there will be only 17,300,000 publicly traded Class A shares. We do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be. Our trading liquidity may also be adversely affected by our structure as a limited liability company, which generally would prevent us from being directly included in certain major stock market indices. Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and sale orders. The market price of our Class A shares could vary significantly as a result of a number of factors, some of which are beyond our control. In the event of a drop in the market price of our Class A shares, you could lose a substantial part or all of your investment in our Class A shares. The initial public offering price for our Class A shares will be negotiated between us and the representatives of the underwriters, based on numerous factors which we discuss in “Underwriting,” and may not be indicative of the market price of our Class A shares after this offering. The market price of our Class A shares may decline below the initial public offering price. Consequently, you may not be able to sell our Class A shares at prices equal to or greater than the price paid by you in this offering.

The following factors could affect our Class A share price:

 

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quarterly or annual variations in our financial and operating results, or those of other companies in our industry;

 

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the public reaction to our press releases, our other public announcements and our filings with the SEC;

 

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strategic actions by us or our competitors, including announcements of significant contracts or acquisitions;

 

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changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;

 

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speculation in the press or investment community;

 

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the failure of research analysts to cover our Class A shares;

 

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sales of our Class A shares by us or other shareholders, or the perception that such sales may occur;

 

•

changes in accounting principles, policies, guidance, interpretations or standards;

 

•

additions or departures of key management personnel;

 

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actions by our shareholders;

 

•

general market conditions, including fluctuations in oil and natural gas prices;

 

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domestic and international economic, legal and regulatory factors unrelated to our performance; and

 

•

the realization of any risks described under this “Risk Factors” section.

The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Class A shares. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our results of operations, cash flows and financial position.

 

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The 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 the Existing Owners after the exercise of the Redemption Right.

After this offering, we will have 24,960,419 Class A shares and 105,164,580 Class B shares outstanding, assuming no exercise of the underwriters’ option to purchase additional Class A shares. The Class A shares sold in this offering will be freely tradable without restriction under the Securities Act, except for any Class A shares that may be held or acquired by our directors, officers or affiliates, which constitute “control securities” under the Securities Act. Any Class A shares purchased by the Existing Owners in this offering pursuant to the directed share program or received by the Existing Owners or the TCW Entities upon their exercise of the Redemption Right will be subject to resale restrictions under a 180 day lock-up agreement with the underwriters and certain additional lock-up restrictions pursuant to the Registration Rights Agreement. Each of the lock-up agreements with the underwriters may be waived in the discretion of certain of the underwriters. Sales by the Existing Owners or the TCW Entities after the exercise of the Redemption Right or sales by other large holders of our Class A shares in the public markets following this offering, or the perception that such sales might occur, could have a material adverse effect on the price of our Class A shares or could impair our ability to obtain capital through an offering of equity securities. In addition, we have agreed to provide registration rights to the Existing Owners and the TCW Entities. Alternatively, we may be required to undertake a future public or private offering of Class A shares and use the net proceeds from such offering to purchase an equal number of OpCo Units, with the cancellation of a corresponding number of Class B shares, from the Existing Owners. Please read “Shares Eligible for Future Sale.”

We may sell additional Class A shares in subsequent 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.

We cannot predict the size of future issuances of our Class A shares or securities convertible into Class A shares or the effect, if any, that future issuances and sales of our Class A shares will have on the market price of our Class A shares.

We expect to be a “controlled company” within the meaning of the NYSE and NYSE Texas rules and, as a result, will qualify for and intend to rely on exemptions from certain corporate governance requirements.

Because our Existing Owners will initially own 94,785,096 OpCo Units and Class B shares, representing approximately 72.8% of our combined voting power following the completion of this offering, and will agree with us, pursuant to the terms of the Voting Agreements, to vote in favor of all director nominees recommended for election by our board of directors, we expect to be a controlled company as of the completion of this offering under the Sarbanes-Oxley Act and the NYSE and NYSE Texas rules. A controlled company is not required to have a majority of independent directors on its board of directors or to form an independent compensation or nominating and corporate governance committee. As a controlled company, we will remain subject to the Sarbanes-Oxley Act and the rules of the NYSE and NYSE Texas that require us, subject to certain phase-in periods, to have an audit committee composed entirely of independent directors. Under these rules, we must have an audit committee that has one member who is independent by the listing date, a majority of members that are independent within 90 days of the effective date and all members that are independent within one year of the effective date. We expect to have five independent directors upon the closing of this offering. Further, under these rules, a controlled company may elect not to comply with certain NYSE and NYSE Texas corporate governance requirements, including the requirements that:

 

•

a majority of the board of directors consists of independent directors as defined under the rules of the NYSE and NYSE Texas;

 

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the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

•

the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

These requirements will not apply to us as long as we remain a controlled company. A controlled company does not need its board of directors to have a majority of independent directors or to form independent compensation and nominating and governance committees. Following this offering, we intend to utilize some or 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. Please see “Management” for additional information. If at any time we cease to be a controlled company, we intend to take all action necessary to comply with the Sarbanes-Oxley Act and the NYSE and NYSE Texas rules, including by appointing a majority of independent directors to our board of directors and establishing a compensation committee and a nominating and corporate governance committee, each composed entirely of independent directors, subject to a permitted “phase-in” period.

Our LLC Agreement, as well as Texas law, will contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A shares and could deprive our investors of the opportunity to receive a premium for their shares.

Our LLC Agreement will authorize our board of directors to issue preferred shares without shareholder approval in one or more series, designate the number of shares constituting any series, and fix the rights, preferences, privileges and restrictions thereof, including 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.

In addition, certain provisions of our LLC Agreement could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our shareholders. Among other things, upon completion of this offering, such provisions of our LLC Agreement include:

 

•

providing that after the Existing Owners no longer have the right, pursuant to the Shareholder’s Agreements, to appoint a majority of our board of directors (the “Trigger Event”), our board of directors will be divided into three classes that are as nearly equal in number as is reasonably possible and each director will be assigned to one of three classes, with each class of directors elected for a three-year term to succeed the directors of the same class whose terms are then expiring. If at the time of the Trigger Event, any of the directors are designees of Double Eagle, such designees shall, at Double Eagle’s election, be classified as members of the third class of directors;

 

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prohibiting cumulative voting in the election of directors;

 

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providing that after the Trigger Event, the affirmative vote of the holders of not less than 66 2/3% in voting power of all then-outstanding common shares entitled to vote generally in the election of our board of directors, voting together as a single class, will be required to remove any director from office, and such removal may only be for “cause”;

 

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providing that after the Trigger Event, all vacancies, including newly created directorships, may, except as otherwise required by the terms of the Shareholder’s Agreements or, if applicable, the rights of holders of a series of preferred shares, only be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, or by a sole remaining director;

 

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providing that after the Trigger Event, shareholders will not be permitted to call special meetings of shareholders;

 

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providing that after the Trigger Event, our shareholders may not act by written consent and may only act at a duly called annual or special meeting;

 

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establish advance notice procedures with respect to shareholder proposals and nominations of persons for election to our board of directors, other than nominations made by or at the direction of our board of directors or any committee thereof; and

 

•

providing that a majority of our board of directors is expressly authorized to adopt, or to alter or repeal our LLC Agreement.

Further, as a Texas limited liability company, we are also subject to provisions of Texas law that may impair a takeover attempt that our shareholders may find beneficial. For additional information, see “Our LLC Agreement—Anti-Takeover Effects of Texas Law and Our LLC Agreement.” Any provision of our LLC Agreement or Texas law that has the effect of delaying or preventing a change in control could limit the opportunity for our shareholders to receive a premium for their common shares and could also affect the price that some investors are willing to pay for our Class A shares.

Our LLC Agreement will designate the Business Court in the Eleventh Business Court Division of the State of Texas (or, if the Business Court in the Eleventh Business Court Division of the State of Texas lacks jurisdiction, the U.S. District Court for the Southern District of Texas, or, if the U.S. District Court for the Southern District of Texas lacks jurisdiction, the district courts of Harris County, Texas) as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders (excluding claims under the federal securities laws for which the U.S. District Court for the Southern District of Texas will be the sole and exclusive forum), which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, other personnel or agents.

Our LLC Agreement will provide that unless we consent in writing to the selection of an alternative forum, the Business Court in the Eleventh Business Court Division of the State of Texas (or, if the Business Court in the Eleventh Business Court Division of the State of Texas lacks jurisdiction, the U.S. District Court for the Southern District of Texas, or, if the U.S. District Court for the Southern District of Texas lacks jurisdiction, the district courts of Harris County, Texas) will be the exclusive forum for the following types of actions or proceedings under Texas statutory or common law:

 

•

any derivative action or proceeding brought on our behalf;

 

•

any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees or agents to us or our shareholders;

 

•

any action asserting a claim against us or any director or officer or other employee of ours arising pursuant to any provision of the TBOC or our LLC Agreement; and

 

•

any action asserting a claim against us or any director or officer or other employee of ours for any other entity claims (as defined in Section 2.115 of the TBOC).

However, such forum selection provision would not apply to claims brought to enforce a duty or liability created by the Exchange Act, the Securities Act or any other claim for which the federal courts have exclusive jurisdiction. Instead, our LLC Agreement will provide that, to the fullest extent permitted by applicable law, the U.S. District Court for the Southern District of Texas will be the sole and exclusive forum for resolving any complaint asserting a cause of action under the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds more favorable for disputes with us or with our directors, officers, other employees or

 

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agents, or our other shareholders, which may discourage such lawsuits against us and such other persons, and may result in increased costs for a shareholder to bring a claim. Alternatively, if a court were to find these provisions of our LLC Agreement inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our results of operations, cash flows, and financial position.

There are certain provisions in our LLC Agreement regarding fiduciary duties of our directors, exculpation and indemnification of our officers and directors and the approval of conflicted transactions that differ from the TBOC in a manner that may be less protective of the interests of our public shareholders and restricts the remedies available to shareholders for actions taken by our officers and directors that might otherwise constitute breaches of fiduciary duties.

Our LLC Agreement contains certain provisions regarding exculpation and indemnification of our officers and directors and the approval of conflicted transactions that differ from the TBOC in a manner that may be less protective of the interests of our public shareholders. For example, our LLC Agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us. In contrast, if we were a corporation formed under the TBOC, a director or officer would be liable to us for (i) breach of the duty of loyalty to us or our shareholders, (ii) an act or omission not in good faith which constitutes a breach of duty or which involves intentional misconduct or knowing violations of the law, (iii) authorization of unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 21.316 of the TBOC, (iv) a transaction from which the director or officer derived an improper personal benefit, or (v) an act or omission for which the liability of a director or an officer is expressly provided for by an applicable statute.

Pursuant to our LLC Agreement and indemnification agreements, we must indemnify our directors and officers for acts or omissions to the fullest extent permitted by law. In contrast, if we were a corporation formed under the TBOC, we could only indemnify directors and officers for acts or omissions if the director or officer acted in good faith and, in the case of conduct in the person’s official capacity as a director, in a manner he or she reasonably believed to be in the best interests of the corporation and, in all other cases, that the person reasonably believed his or her conduct was not opposed to the best interests of the corporation and with respect to any criminal action or proceeding, that such person had no reasonable cause to believe his or her conduct was unlawful.

Accordingly, our LLC Agreement may be less protective of the interests of our public shareholders, when compared to the TBOC, insofar as it relates to the exculpation and indemnification of our officers and directors.

We are a holding company. Our sole material asset after completion of this offering will be 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.

We are a holding company and will have no material assets after the completion of this offering other than our equity interest in OpCo. Please see “Corporate Reorganization.” We will have no independent means of generating revenue. To the extent OpCo has available cash and subject to the terms of any debt instruments or other applicable agreements, we intend to cause OpCo to make (i) generally pro rata distributions to OpCo Unitholders, including us, in an amount at least sufficient to allow us to pay our taxes, (ii) at the election of certain holders of OpCo Units, additional distributions in an amount generally intended to allow such OpCo Unitholders to satisfy their respective income tax liabilities with respect to their allocable share of the income of OpCo (based on certain assumptions and conventions), which additional distributions may be made on a pro rata basis to all OpCo

 

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Unitholders (including us) or a non-pro rata basis to OpCo Unitholders (other than us) in redemption of OpCo Units from such holders and (iii) non pro rata distributions to us in an amount at least sufficient to reimburse us for our corporate and other overhead expenses. In addition, if our board of directors were to determine to pay dividends to holders of Class A shares, we, as the sole managing member of OpCo, would expect to cause OpCo to make pro rata distributions to all of its unitholders, including to us, in an amount sufficient to allow us to fund such dividends to our shareholders in accordance with our dividend policy. Therefore, although we expect to pay dividends on our Class A shares in amounts determined by our board of directors, from time to time, our ability to do so may be limited to the extent OpCo and its subsidiaries are limited in their ability to make these and other distributions to us. To the extent that we need funds and OpCo or its subsidiaries are restricted from making distributions under applicable law or under the terms of any current or future financing or other arrangements or are otherwise unable to provide such funds, our results of operations, cash flows and financial position could be materially and adversely affected.

In certain circumstances, OpCo will be required to make tax distributions to OpCo Unitholders, and such tax distribution may be substantial. To the extent we receive tax distributions in excess of our actual tax liabilities and retain such excess cash, the OpCo Unitholders would benefit from such accumulated cash balances if they exercise their Redemption Right.

Pursuant to the OpCo LLC Agreement, OpCo will make generally pro rata distributions to the OpCo Unitholders, including us, in an amount sufficient to allow us to satisfy our actual tax liabilities. In addition, to the extent OpCo has available cash, OpCo will be required to make additional pro rata tax distributions to all OpCo Unitholders in an amount generally intended to allow the OpCo Unitholders (other than us) to satisfy their assumed tax liabilities with respect to their allocable share of the income of OpCo (based on certain assumptions and conventions and as determined by OpCo). For this purpose, the determination of available cash will take into account, among other factors, (i) the existing indebtedness and other obligations of OpCo and its subsidiaries and their anticipated borrowing needs, (ii) the ability of OpCo and its subsidiaries to take on additional indebtedness on commercially reasonable terms and (iii) any necessary or appropriate reserves.

The amount of such additional tax distributions will be determined based on certain assumptions, including assumed income tax rates, and will be calculated after taking into account other distributions (including other tax distributions) made by OpCo. Additional tax distributions may significantly exceed the actual tax liability for many of the OpCo Unitholders, including us. If we retain the excess cash we receive from such distributions, the OpCo Unitholders would benefit from any value attributable to such accumulated cash balances as a result of their exercise of the Redemption Right. However, we intend to take steps to eliminate any material excess cash balances, which could include, but are not necessarily limited to, a distribution of the excess cash to holders of our Class A shares or the reinvestment of such cash in OpCo for additional OpCo Units.

In addition, the tax distributions that OpCo may be required to make may be substantial, and the amount of any additional tax distributions OpCo is required to make likely will exceed the tax liabilities that would be owed by a corporate taxpayer similarly situated to OpCo. Funds used by OpCo to satisfy its obligation to make tax distributions will not be available for reinvestment in our business, except to the extent we or certain other OpCo Unitholders use any excess cash received to reinvest in OpCo for additional OpCo Units. In addition, because cash available for additional tax distributions will be determined taking into account the ability of OpCo and its subsidiaries to take on additional borrowing, OpCo may be required to increase its indebtedness in order to fund additional tax distributions. Such additional borrowing may adversely affect our results of operations, cash flows and financial position by, without limitation, limiting our ability to borrow in the future for other purposes, such as capital expenditures, and increasing our interest expense and leverage ratios.

 

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If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and OpCo might be subject to potentially significant tax inefficiencies might result.

Section 7704 of the Internal Revenue Code of 1986, as amended (the “Code”), generally provides that a “publicly traded partnership” will be treated as a corporation for U.S. federal income tax purposes. We intend to operate such that OpCo does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is a partnership the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, redemptions of OpCo Units pursuant to the Redemption Right (or acquisitions of OpCo Units pursuant to the Call Right) or other transfers of OpCo Units could cause OpCo to be treated as a publicly traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that redemptions or other transfers of OpCo Units qualify for one or more such safe harbors. For example, we intend to limit the number of OpCo Unitholders, and the OpCo LLC Agreement, which will be entered into in connection with the closing of this offering, will provide for limitations on the ability of OpCo Unitholders to transfer their OpCo Units and will provide us, as the managing member of OpCo, with the right to impose restrictions (in addition to those already in place) on the ability of OpCo Unitholders to redeem their OpCo Units pursuant to the Redemption Right to the extent we believe it is necessary to ensure that OpCo will continue to be treated as a partnership for U.S. federal income tax purposes.

If OpCo were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result for us and for OpCo, including as a result of our inability to file a consolidated U.S. federal income tax return with OpCo. In particular, OpCo would pay U.S. federal (and any applicable state) income tax on its taxable income at the corporate tax rate. Distributions to EagleRock would generally be taxed again as corporate distributions (subject to any applicable corporate dividends received deduction). Because a tax would be imposed on OpCo as a corporation, the amount of cash distributions to us could be substantially reduced, which may cause a substantial reduction in the value of our Class A shares.

We will incur increased costs as a result of being a publicly traded company.

As a publicly traded company, we will incur significant legal, accounting, and other expenses that we did not incur prior to this offering. In addition, the Sarbanes-Oxley Act, as well as rules implemented by the NYSE, require publicly traded entities to adopt various corporate governance practices that will further increase our costs. As a result, we expect these requirements will increase our legal and financial compliance costs beyond that reflected in the financial statements included in this prospectus.

Forecasts and valuation assumptions underlying our initial public offering are preliminary and subject to change; our performance may not meet expectations.

All financial and operational projections are preliminary management estimates subject to diligence completion and market conditions; actual results and post-initial public offering results may differ materially. We may not achieve targeted margins, utilization or acquisition synergies, and the timing or terms of identified post-initial public offering acquisitions may vary or not occur. If our quarterly or annual operating results fall below the expectations of investors or securities analysts or any forecasts or guidance we may provide to the market, the price of our common shares could decline substantially. Such a share price decline could occur even when we have met any previously publicly stated guidance we may provide. We believe that quarterly or annual comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus may contain “forward-looking statements.” All statements, other than statements of historical fact, included in this prospectus regarding our strategy, future operations, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this prospectus, words such as “may,” “assume,” “forecast,” “could,” “would,” “should,” “will,” “plan,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “budget” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events at the time such statements were made. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the section titled “Risk Factors” included in this prospectus. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the forward-looking statements contained in this prospectus are based on reasonable assumptions, you should be aware that many factors could affect our actual results of operations, cash flows and financial position and could cause actual results to differ materially from those in such forward-looking statements, including:

 

•

our customers’ demand for and use of our surface, resources and water infrastructure assets;

 

•

our ability to enforce our SUA and other agreements with our customers;

 

•

the success of our operating partners in executing their business strategies, including their ability to construct and operate water infrastructure, attract customers and operate successfully;

 

•

our customers’ ability to develop our land or potential changes to our customers’ development plans, or any potential acquired acreage to accommodate any future surface use developments;

 

•

the domestic and foreign supply of, and demand for, energy sources, including the impact of actions relating to oil price and production controls by OPEC+ with respect to oil production levels and announcements of potential changes to such levels;

 

•

our reliance on a limited number of customers and a particular region for substantially all of our revenues, including the potential conditions of such customers within such region;

 

•

our ability to enter into favorable contracts regarding surface uses, access agreements and fee arrangements, including the prices we are able to charge and the margins we are able to realize;

 

•

our ability to maintain leases and permits, including our ability to renew leases on state and federal leased land;

 

•

changes in state and federal land use policies that change or restrict our right to use state and federal leased land or increase the cost of such leases;

 

•

our business strategies and our ability to execute thereon, including our ability to attract customers to use our land and resources;

 

•

commodity price volatility and trends related to changes in commodity prices, and our customers’ ability to manage through such volatility;

 

•

the level of competition from other companies, including those offering resources that compete with the resources from our land;

 

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changes in the price charged to our customers and availability of services necessary for our customers to conduct their businesses, as a result of oversupply, government regulations or other factors;

 

•

any planned or future expansion projects by us or our customers;

 

•

the development of advances or changes in energy technologies or practices;

 

•

our ability to successfully implement our growth plans, including through future acquisitions of acreage and/or introduction of new revenue streams;

 

•

the potential deterioration of our customers’ financial condition and their ability to access capital to fund their development programs;

 

•

the degree to which consolidation among our customers may affect spending on U.S. drilling and completions in the near term;

 

•

our customers’ ability to obtain necessary supplies, raw materials and other critical components on a timely basis, or at all;

 

•

our and our customers’ ability to obtain government approvals or acquire or maintain necessary permits, including those related to the development and operation of produced water handling facilities, mines and water wells;

 

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operational disruptions and liability related thereto associated with our customers, including those due to environmental hazards, fires, explosions, chemical mishandling or other industrial accidents;

 

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our liquidity and our ability to access the capital markets on favorable terms, or at all, which depends on general market conditions, including the impact of inflation, elevated interest rates and Federal Reserve policies and potential economic recession;

 

•

uncertainty of estimates of resources and minerals, such as oil, natural gas and NGL reserves and production, including those of our customers;

 

•

the effects of changes in general economic, business or industry conditions, market volatility, including as a result of slowing growth and a potential economic recession, an elevated inflation rate, high interest rates, changes in U.S. and international trade policies and relations, central bank policy and associated liquidity risks;

 

•

the effects of political instability or armed conflict in oil and natural gas producing regions, which may decrease demand for oil and natural gas or contribute to volatility in the prices for oil and natural gas, which could decrease demand for the use of our land and resources;

 

•

our level of indebtedness and our ability to service our indebtedness;

 

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title defects in the acreage that we acquire;

 

•

the markets for real estate in the areas in which we operate and own or plan to own real estate, including pricing estimates, availability of land and our ability to acquire such land on favorable terms, or at all;

 

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our ability to integrate acquired acreage, and any future acquisitions, and manage related growth;

 

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our ability to recruit and retain, or secure the services of, key management and other personnel and service providers;

 

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changes in laws and regulations (or the interpretation thereof), including those related to hydraulic fracturing, accessing water, disposing of wastewater, transferring produced water, interstate brackish water transfer, carbon pricing, pipeline construction, taxation or emissions, leasing, permitting or drilling and various other environmental matters;

 

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changes in effective tax rates, or adverse outcomes resulting from other tax increases or an examination of our income or other tax returns and tax inefficiencies;

 

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general domestic and international political and regulatory conditions, including actions taken by the federal, state or foreign governments, such as executive orders or new or expanded regulations, including U.S. and international trade policies and tax policies, the OBBB Act and its impact on the IRA, and any action related to surface uses and/or development of our mineral and royalty interests;

 

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the severity and duration of world health events, natural disasters or inclement or hazardous weather conditions, including cold weather, droughts, earthquakes, flooding and tornadoes;

 

•

evolving cybersecurity risks, such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insider or others with authorized access, cyber or phishing-attacks, ransomware, social engineering, physical breaches or other actions; and

 

•

other factors discussed elsewhere in this prospectus, including in the section titled “Risk Factors.”

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the operation of business in our industry. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus. Should one or more of the risks or uncertainties described in this prospectus occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.

All forward-looking statements, expressed or implied, included in this prospectus are expressly qualified in their entirety by this cautionary note. This cautionary note should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this prospectus.

 

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USE OF PROCEEDS

We expect to receive $288.2 million of proceeds (or $333.1 million if the underwriters’ option to purchase additional Class A shares is exercised in full) from this offering based upon the assumed public offering price of $18.50 per Class A share (the midpoint of the price range set forth on the cover page of this prospectus), net of underwriting discounts and estimated offering expenses payable by us. See “Underwriting.”

We intend to contribute all of the net proceeds from this offering to OpCo in exchange for newly issued OpCo Units at a per-unit price equal to the per share price paid by the underwriters for our Class A shares in this offering. OpCo intends to use the net proceeds from this offering to repay in full, and terminate, the Predecessor Credit Facility and for general corporate purposes.

The following table illustrates the anticipated use of the proceeds of this offering:

 

Source of Funds						Uses of Funds
Gross Proceeds from this offering		$	320,050,000			Repayment of Predecessor Credit Facility		$	270,000,000
						General Corporate Purposes		18,226,450
						Underwriting discounts, fees and expenses			31,823,550
Total		$	320,050,000			Total		$	320,050,000

If the underwriters exercise their option to purchase additional Class A shares in full, we expect to receive approximately $44.9 million of additional net proceeds based upon the assumed public offering price of $18.50 per Class A share (the midpoint of the price range set forth on the cover page of this prospectus). We intend to contribute all of the net proceeds from any exercise of such option to OpCo in exchange for additional OpCo Units. OpCo intends to use such additional net proceeds to increase the amount of proceeds we will use for general corporate purposes.

After the application of the net proceeds from this offering, we will own approximately 19.2% of outstanding OpCo Units (or approximately 20.8% of outstanding OpCo Units if the underwriters’ option to purchase additional Class A shares is exercised in full).

Each $1.00 increase or decrease in the assumed public offering price of $18.50 per Class A share (the midpoint of the price range set forth on the cover of this prospectus) would increase or decrease the net proceeds to us from this offering by approximately $16.2 million (or approximately $18.6 million if the underwriters’ option to purchase additional Class A shares is exercised in full) and, as a result, would increase or decrease the amount of proceeds we will use for general corporate purposes by approximately $16.2 million (or approximately $18.6 million if the underwriters’ option to purchase additional Class A shares is exercised in full), assuming that the number of Class A shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and estimated offering expenses payable by us. If the proceeds increase due to a higher public offering price or an increase in the number of Class A shares offered, we intend to contribute the additional net proceeds to OpCo in exchange for additional OpCo Units and OpCo intends to use such additional net proceeds to increase the amount of proceeds we will use for general corporate purposes. If the proceeds decrease due to a lower public offering price or a reduction in the number of Class A shares offered, we would contribute a lesser amount of net proceeds to OpCo and receive fewer OpCo Units and OpCo will decrease the amount of proceeds we will use for general corporate purposes.

 

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As of December 31, 2025, we had $265.6 million of outstanding borrowings under our Predecessor Credit Facility, exclusive of $35.1 million of unamortized debt premium (discount) and issuance costs, net, which matures on April 4, 2029. The weighted average interest rate on the total amount of borrowings outstanding under the Predecessor Credit Facility as of December 31, 2025 was 12.83% in the case of revolving credit borrowings and 12.81% in the case of term loan borrowings. We are currently in compliance with all affirmative and negative covenants under the facility.

 

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DIVIDEND POLICY

We expect to seek to pay dividends on our Class A shares in amounts determined from time to time by our board of directors.

While we expect to seek to pay dividends, we have not adopted a formal written dividend policy to pay any particular amount of dividends based on the achievement of, or derivable from, any specific financial metrics. Furthermore, we are not contractually obligated to pay any dividends and do not have any required minimum dividend amount, and the Credit Facility will limit our ability to pay dividends. If our board of directors determines to pay dividends in the future, the amount of such dividends may vary from quarter to quarter and may be significantly reduced or eliminated entirely. The actual amount of any dividends we pay may fluctuate depending on our cash flow needs, which may be impacted by the availability of financing alternatives, the need to service any future indebtedness or other liquidity needs, potential acquisition opportunities and general industry and business conditions, including the level of use of our land and its resources. Given our reliance on our customers and their activity on our land, we cannot provide any assurance that we will pay dividends in the future. For more information see “Risk Factors—Risks Related to this Offering, Our Corporate Structure and Our Class A Shares—Our ability to pay dividends to our shareholders may be limited by our holding company structure, contractual restrictions and regulatory requirements.” The declaration and payment of any dividends by us will be at the sole discretion of our board of directors, which may change our dividend policy or discontinue payment of dividends at any time. In determining whether to pay any dividends and the timing and amount thereof, we expect that our board of directors will consider:

 

•

general economic and business conditions;

 

•

our financial condition and results of operations;

 

•

our cash flows from operations and current and anticipated cash needs;

 

•

our capital requirements, including future acreage acquisitions;

 

•

legal, tax, regulatory and contractual (including under the Credit Facility and future financing arrangements) restrictions and implications on the payment of dividends by us to our shareholders or the payment of distributions by our subsidiaries to us; and

 

•

such other factors as our board of directors may deem relevant.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2025, as follows:

 

•

on an actual basis for L&E, our predecessor;

 

•

on a pro forma basis to give effect to the exclusion of the Excluded Assets, the Shallow Valley Contribution and the DE Flow Contribution; and

 

•

on a pro forma, as adjusted basis to give effect to the Pro Forma Transactions and the Up-C Reorganization and this offering at the assumed initial offering price of $18.50 per Class A share (the midpoint of the price range set forth on the cover of this prospectus) and the application of the net proceeds therefrom as described under the section titled “Use of Proceeds.”

The information set forth below is illustrative only and will be adjusted based on the actual public offering price and other final terms of this offering. The table below should be read in conjunction with, and is qualified in its entirety by reference to, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial information of L&E and our unaudited pro forma condensed consolidated financial information for the periods and as of the dates indicated.

 

		As of December 31, 2025
		Predecessor				Pro Forma				Pro Forma, as Adjusted
		(in thousands, except number of common shares)
Cash and cash equivalents		$	9,042			$	—			$	16,818
Long-Term Debt:
Predecessor Credit Facility(1)			265,610				265,610				—
Credit Facility			—				—				—
Equity:
Common units (2,095 units authorized, 1,195 and 1,000 outstanding as of December 31, 2025 and 2024, respectively)			14,016				—				—
Additional paid in capital—members’ interests			(1	)			—				—
Additional paid in capital—warrants—related party(2)			18,416				—				—
Additional paid in capital			—				1,272,087				—
Accumulated deficit			(74,146	)			(89,401	)			—
Class A members’ equity; no Class A shares issued or outstanding (actual and pro forma); 24,960,419 Class A shares issued and outstanding (pro forma, as adjusted)			—				—				290,093
Class B members’ equity; no Class B shares issued or outstanding (actual and pro forma); 105,164,580 Class B shares issued and outstanding (pro forma, as adjusted)			—				—				—
Noncontrolling interest(3)			—				—				1,222,238
Total capitalization		$	223,895			$	1,448,296			$	1,512,331

(1)	The balance of the Predecessor Credit Facility reflects outstanding borrowings as of December 31, 2025, and excludes $35.1 million of unamortized premium. As of May 1, the Predecessor Credit Facility had a payoff balance of approximately $270.0 million.

 

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