Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2026

The accompanying unaudited condensed consolidated financial statements and related notes (“Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with Rule 10-01 of Regulation S-X and reflect all adjustments, consisting of normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods presented. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the Company’s annual audited financial statements and accompanying notes for the year ended December 31, 2025, included within the Company’s final prospectus filed with the SEC on May 14, 2026, pursuant to Rule 424(b) under the Securities Act of 1933, as amended.

Change in Presentation

In connection with the completion of the IPO, the Company revised the revenue line items used by the Predecessor in the unaudited condensed consolidated statements of operations. Amounts previously presented within “Water sales,” “Related party water sales,” and “Surface and other revenues” are now presented within “Resource sales,” “Resource sales - related party,” “Surface use related revenues,” “Surface use royalties,” and “Surface use royalties - related party.” The revisions were made to better reflect the Company's revenue streams. The Company also combined the components of members' deficit previously presented separately: common units, additional paid-in capital - members’ interests, additional paid-in capital - warrants - related party, and accumulated deficit into a single line item titled “Members’ deficit” on the unaudited condensed consolidated balance sheets. The changes in presentation are reclassifications made to conform prior-period amounts to the current-period presentation; they do not represent a change in accounting principle or the correction of an error and did not result in a restatement. These changes have been applied retrospectively to all periods presented and had no impact on previously reported total revenues, income from operations, net income (loss), total members' deficit, or cash flows for any period presented.

Principles of Consolidation

The Financial Statements include the accounts of the Company, OpCo and OpCo's wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

In these Financial Statements, periods prior to May 15, 2026 reflect the financial statements of the Predecessor and its subsidiaries. Periods subsequent to the consummation of the IPO reflect the financial statements of the consolidated Company.

Results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2026.

The Company had no other comprehensive income (loss) for the three and six months ended June 30, 2026 and 2025. As such, net income (loss) is equivalent to total comprehensive income (loss).

Consolidation

The Company has assessed that the members with equity at risk in OpCo lack the authority, through rights granted to them, to direct the activities that significantly impact OpCo’s economic performance. As such, the Company determined that OpCo is a variable interest entity. The Company, as the managing member of OpCo, operates and controls all of the business and affairs of OpCo and also has the obligation to absorb losses or the right to receive benefits that could be potentially significant. Therefore, the Company is considered the primary beneficiary and consolidates OpCo for accounting purposes.

These Financial Statements include the accounts of the Company, OpCo and OpCo's wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Noncontrolling Interest

These Financial Statements include a noncontrolling interest representing the percentage of OpCo Units not owned by the Company. The noncontrolling interest is subject to change in connection with various equity transactions such as the issuance of Class A shares, the redemption of Class B shares (and corresponding OpCo Units) for Class A shares, or the cancellation of Class B shares (and corresponding OpCo Units).

Segment Information

The Company determines its operating and reportable segment in accordance with ASC Topic 280, Segment Reporting, based on its internal management structure, internal reporting, and the manner in which financial information is reviewed and resources are allocated by the Company’s chief operating decision maker (“CODM”), which is the Chief Executive Officer. The CODM regularly evaluates operating results of one operating and reportable segment. The Company determined that the operating segment is consistent with the organization’s structure and CODM’s review of operating results. Accordingly, the financial results, assets, and liabilities presented in these Financial Statements represent the results of the single reporting segment. All of our long-lived assets are located in the United States.

Net income (loss), as presented on our condensed consolidated statements of operations, is the primary measure most consistent with U.S. GAAP used by the Company’s CODM to evaluate the performance of and allocate resources within the Company’s business. Further, significant segment expenses the CODM reviews and utilizes to manage the Company’s operations are cost of sales and general and administrative expenses at the consolidated level (inclusive of related party amounts), which are presented in the Company’s unaudited condensed consolidated statements of operations. Other segment items included in consolidated net income (loss) include depreciation and amortization expense, gain on sale of property, plant, and equipment, net, interest expense and income tax benefit (expense), which are included in the unaudited condensed consolidated statements of operations. The measure of segment assets is reported on the unaudited condensed consolidated balance sheets as total assets. The CODM does not review segment assets and expenses at a different level or category.

Use of Estimates

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Financial Statements and revenues and expenses during the reporting period. Such estimates include, but are not limited to, allowance for credit losses, assessment of useful lives and recoverability of long-lived assets, including property, plant and equipment and intangible assets, discount rates underlying our lease right-of-use assets and liabilities, estimates related to deferred tax liabilities, estimates of assets acquired and liabilities assumed in a business combination, and estimates of fair value of warrants and debt. Management bases its estimates on historical experience, current conditions and various other assumptions that it believes to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results could differ from those estimates.

Cash, cash equivalents and restricted cash

The Company considers all highly liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents. The Company maintains deposits in financial institutions that are insured by the U.S. Federal Deposit Insurance Corporation (“FDIC”). From time-to-time, the deposits may exceed the amount of deposit insurance available through the FDIC. However, the Company has not experienced any losses related to amounts in excess of FDIC limits.

As of June 30, 2026 and December 31, 2025, the Company held approximately $0.3 million and $0.3 million of restricted cash held as certificates of deposit related to surety bonds associated with right-of-way agreements, respectively. The Company has recorded these amounts as other noncurrent assets on our unaudited condensed consolidated balance sheets. The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets to the amounts shown in the unaudited condensed consolidated statements of cash flows.


	June 30,		December 31,
(in thousands)	2026		2025
Cash and cash equivalents	$	61,770	$	9,042
Other noncurrent assets	$	289	$	285
Total cash, cash equivalents and restricted cash	$	62,059	$	9,327

Accounts Receivable

Accounts receivable represents amounts due from third-party customers in connection with revenue generating activities, and are reported at historical carrying value, net of write-offs and any provision for credit loss. Accounts are written off when they are determined to be uncollectible based upon management’s assessment of individual accounts. A provision for credit loss is evaluated on a regular basis by management and is based upon the collectability of the receivables after considering the historical loss rates, age of receivables, credit rating of the counterparty and prevailing economic conditions. As of June 30, 2026 and 2025, there was no provision for credit loss recorded. At June 30, 2026 and December 31, 2025, the accrued revenue (unbilled receivable) included in accounts receivable, for which the performance obligation has been met to the customer, was approximately $1.0 million and $0.3 million, respectively.

Accounts Receivable - Related Party

Related party accounts receivable represents amounts due from related parties in connection with the Company's revenue generating activities, including resource sales and surface use royalties transacted with related parties, as well as other transactions with related parties in connection with the IPO. These amounts are reported at historical carrying value, net of write-offs and any provision for credit loss, and are subject to the same assessment of collectability and provision for credit loss methodology described above for accounts receivable. Related party accounts receivable is presented separately on the face of the condensed consolidated balance sheets. Refer to Note 11 – Related Party Transactions, for further information regarding the Company's transactions and balances with related parties.

Accounts Payable - Related Party

Related party accounts payable represents amounts due to related parties in connection with goods and services procured from related parties in the ordinary course of business and other transactions with related parties in connection with the IPO. These amounts are reported at historical carrying value and are presented separately on the face of the condensed consolidated balance sheets. Refer to Note 11 – Related Party Transactions, for further information regarding the Company's transactions and balances with related parties.

Inventory

Inventory is comprised of cattle, which are stated at the lower of cost or net realizable value, with costs determined utilizing the first-in, first-out method. There were no lower of cost or net realizable value inventory adjustments for the three and six months ended June 30, 2026 and 2025.

Prepaid Expenses

Prepaid expenses consist primarily of prepaid insurance costs and prepaid subscription and licensing fees, which are amortized using the straight-line method over the term.

Property, Plant, and Equipment, net

Property, plant, and equipment are stated at cost, or upon acquisition, at its fair value and include land, furniture and fixtures, building, leasehold improvements, machinery and equipment, and vehicles. Expenditures for construction activities, major improvements and betterments that extend the useful life of an asset are capitalized while expenditures for repairs and maintenance are expensed as incurred.

Upon sale or other retirement of depreciable property, the cost and accumulated depreciation are removed from the related accounts, and any gain or loss is reflected in the unaudited condensed consolidated statements of operations. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets.

The estimated useful lives of the major classes of property, plant, and equipment are as follows:


Furniture and fixtures		2 years
Vehicles		3 years
Buildings		8 - 12 years
Leasehold improvements		2 - 10 years
Water wells, facilities and related equipment		2 - 20 years

Impairment of Long-Lived Assets

Management reviews the Company’s property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. Assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets for purposes of assessing recoverability. Recoverability is generally determined by comparing the carrying value of the asset to the expected undiscounted future cash flows of the asset. If the carrying value of the asset is not recoverable, the amount of impairment loss is measured as the excess, if any, of the carrying value of the asset over its estimated fair value. No impairments were recorded during the three and six months ended June 30, 2026 and 2025.

Leases

Contracts are evaluated to determine whether they contain a lease at inception. Leases are classified as either finance leases or operating leases based on criteria in ASC Topic 842, Leases (“ASC 842”). The Company’s operating leases are generally comprised of corporate vehicles and a corporate office lease that was entered into subsequent to the IPO. Additionally, the Predecessor had a corporate office lease that did not become an obligation of the Company as part of the IPO. Refer to Note 1 – The Company – Hydrosource Distribution for more information on the amounts of leased assets and the related lease liabilities distributed to Hydrosource as part of the Hydrosource Distribution.

Right of Use (“ROU”) assets and lease liabilities are recognized on the commencement date based on the present value of lease payments over the lease term. ROU assets are based on the lease liability and are increased by prepaid lease payments and decreased by lease incentives received. Lease incentives are amortized through the lease asset as reductions of expense over the lease term. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities.

The Company reviews its ROU assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. Recoverability is evaluated by comparing the carrying amount of the ROU asset to the future net undiscounted cash flows the asset is expected to generate. If the comparison indicates that the Company will not be able to recover the carrying amount, the Company recognizes an impairment loss for the amount by which the carrying amount exceeds the estimated fair value. There was no impairment of ROU assets for the three and six months ended June 30, 2026 and 2025.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. If the lease provides an implicit rate, the Company uses that rate for determining lease value. If an implicit rate is unavailable, the Company uses the incremental borrowing rate based on the information available at commencement date, including the collateralized borrowing rate for the Company, in determining the present value of lease payments.

The Company’s operating leases are included in short-term lease liability and long-term lease liability in the unaudited condensed consolidated balance sheets. Lease costs comprised of office rent associated with the lease are included in operating expenses in the unaudited condensed consolidated statements of operations.

Net Investment in Sales-Type Lease

The Company is a lessor in a sales-type lease arrangement related to land. The Company classifies leases in which it is the lessor at lease commencement as operating, direct financing, or sales-type leases in accordance with ASC 842. The Company’s net investment in the sales-type lease is comprised of (i) a lease receivable measured at the present value of remaining lease payments and (ii) an unguaranteed residual asset and is presented within other current assets and net investment in sales-type lease on the unaudited condensed consolidated balance sheet, as applicable. Interest income on the net investment is recognized over the lease term using the effective interest method and presented as interest income in the unaudited condensed consolidated statements of operations.

Intangible Assets, Net

The Company recognizes an intangible asset as finite-lived if its useful life is limited by legal, contractual, or economic factors. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. The amortization period reflects the pattern in which the asset’s economic benefits are consumed. The Company periodically reviews the remaining useful lives of these assets and revises them if a change in estimate is warranted. Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an asset is not recoverable from its undiscounted future cash flows. The loss is measured as the excess of the carrying amount over the fair value of the asset. No impairments were recorded during the three and six months ended June 30, 2026 and 2025.

The estimated useful lives of the major classes of intangibles are as follows:


Water rights		15 years
Surface rights		15 years
Saltwater disposal		15 years
Customer contract		13 years
Customer relationships		20 years
Sourced water		25 years

Refer to Note 4 – Acquisitions for further details regarding the Company’s intangible assets.

Internal Use Software

The Company capitalizes certain implementation costs incurred for development and costs incurred for cloud computing software implementations. Costs are primarily comprised of contracted labor and related expenses. Costs are capitalized once the project is defined, funding is committed, and it is determined that the software will be used for its intended use. Capitalization of these costs concludes once the project is substantially complete and the software is ready for its intended purpose. Post-configuration training and maintenance costs are expensed as incurred. Cloud computing software implementation costs incurred in a hosting arrangement are capitalized and reported as a component of prepaid expenses and other current assets, and other noncurrent assets. Capitalized software development costs are amortized on a straight-line basis over an estimated useful life of three years. As of June 30, 2026, the Company has capitalized approximately $0.2 million of cloud computing software implementation costs. As of December 31, 2025, the Company had no capitalized cloud computing software implementation costs.

Deferred Offering Costs

The Company complies with the requirement of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — “Expenses of Offering”. Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO. Such costs were deferred until the closing of the IPO, at which time the deferred costs were offset against the offering proceeds, net of any relevant reimbursements of such costs.

As of June 30, 2026, the Company had $8.5 million of deferred offering costs included in shareholders’ and members’ equity on the unaudited condensed consolidated balance sheets, all of which were paid as of June 30, 2026. Total reimbursements paid to a related party in connection with deferred offering costs were approximately $5.3 million for the three and six months ended June 30, 2026. As of December 31, 2025, the Company had capitalized approximately $1.4 million of deferred offering costs.

Acquisitions

The Company performs an evaluation of acquisition transactions by calculating the relative fair value of the assets acquired to determine if the transaction should be accounted for as a business combination or asset acquisition. If substantially all of the relative fair value is concentrated in a single asset or group of similar assets, or the acquired entity does not meet the definition of a business, the transaction is recorded as an asset acquisition. All other transactions are recorded as business combinations. In accounting for business combinations, all assets acquired and liabilities assumed are recorded at the acquisition date fair value. Any purchase price in excess of the fair value of assets acquired and liabilities assumed is recorded as goodwill.

Warrants

As further discussed in Note 6 - Long Term Debt, the Predecessor issued warrants to the lenders under the Predecessor Credit Facility. Each holder received the right to acquire Common Units as set forth in the Warrant Agreement. Warrants for common shares are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contain variable share provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses classification of its warrants for shares of common stock at each reporting date to determine whether a change in classification between equity and liabilities is required. In April 2025, the Company modified the terms of the outstanding warrants in conjunction with a modification of the Company’s long-term debt, removing a variable settlement feature from the warrants. As a result, the outstanding warrants met the requirements for equity classification under ASC 815-40. Accordingly, on April 14, 2025, the warrants were reclassified from liabilities to additional paid-in capital. Subsequently, as a part of the IPO, 733 of the equity classified warrants were exercised during the second quarter of 2026 and the remaining 167 were forfeited. The exercised warrants resulted in the issuance of 10,379,264 Class B shares. The accounting impact was recorded within members' equity with no changes to cash or liabilities.

Fair Value Considerations

Fair value represents the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the reporting date. The Company’s assets and liabilities that are measured at fair value at each reporting date are classified according to a hierarchy that prioritizes inputs and assumptions underlying the valuation techniques. This fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs, and consists of three broad levels:

Level 1—Unadjusted quoted prices in active markets for identical, unrestricted assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumptions market participants would use in the pricing of the asset or liability and are consequently not based on market activity but rather through particular valuation techniques.

There were no reclassifications between levels during the three and six months ended June 30, 2026 and 2025.

Fair Value Measurements

Up to the date the warrants were reclassified from liabilities to equity, the fair value of the Company’s liability classified warrants was determined to be de minimis. The valuation of the warrants is considered to be at Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable. The Company’s non-financial assets, other than those acquired in acquisitions, which consist primarily of property and equipment, right-of-use assets and intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. The fair values of the warrant liabilities and non-financial assets are determined, as required, based on Level 3 measurements, including estimates of the amount and timing of future cash flows based upon historical experience, expected market conditions, and management’s plans. All other components of the unaudited condensed consolidated balance sheets, such as accounts receivable, cash and cash equivalents, and others approximate fair value as of June 30, 2026 and December 31, 2025.

Share-Based Compensation

Restricted Share Units

In connection with the IPO, the Company’s board of directors (the “Board”), adopted a Long-Term Incentive Plan (“LTIP”) for employees, service providers, and directors. The LTIP authorizes up to 13,012,499 Class A shares for issuance and provides the Board with the authority to offer several different types of long-term incentives, including stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards, or substitute awards. On May 20, 2026, the Board authorized the Company’s Chief Executive Officer to grant up to 810,811 restricted stock units (”RSUs”) to current and future employees and service providers of the Company (other than executive officers). Each RSU represents the right to receive one Class A share upon vesting, and the right to receive dividends paid to each Class A shareholder between the grant date and vesting date. RSUs issued to qualifying individuals are recorded on the grant date at fair value. Expense is recognized on a straight-line basis over the requisite service period (the vesting period of the award) as either cost of sales (exclusive of depreciation and amortization) or general and administrative expense in the unaudited condensed consolidated statements of operations. RSUs include dividend equivalent

rights that permit holders of granted but unvested RSUs to receive distributions alongside common equity holders of the Company as if the RSUs were granted as of the date of record for said distribution.

IPO Stock-based Awards

On May 15, 2026, in connection with the closing of the IPO, the Company issued a one-time, non-cash stock-based compensation award to certain members of the Company’s management team. In connection with these awards, the Company granted an aggregate of 3,100,001 Class A shares. Based on the IPO price of $18.50 per share, the awards have a grant-date fair value of approximately $57.4 million, subject to tax withholdings. Because the awards were fully vested upon completion of the IPO, the Company recognized the grant-date fair value amount as stock-based compensation expense on the IPO closing date in general and administrative expense in the unaudited condensed consolidated statements of operations.

The Company accounts for all share-based compensation in accordance with ASC Topic 718 Compensation—Stock Compensation (“ASC 718”).

Revenue Recognition

Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers, (“ASC 606”). The Company recognizes revenue when it satisfies the performance obligation to the customer by transferring control over a product or service to the customer.

The Company recognizes revenue following the five-step model under ASC 606: (i) identifying the contract, (ii) identifying performance obligations, (iii) determining the transaction price, (iv) allocating the transaction price, and (v) recognizing revenue as performance obligations are satisfied. The Company’s contracts generally represent a single performance obligation, and revenues are recognized at a point in time.

The Company generates all its revenue from its operations in the Permian Basin. The Company has disaggregated its revenue as follows which is based on the nature of the products and services rendered:

Resource sales and resource sales - related party: The Company has water rights to obtain water from its constructed water wells within its ranches or acreage. The Company in certain instances may purchase additional water from external sources to supplement its water supply. Water sales involve the sales of the Company’s water to its customers for oil and gas completion activities. Revenue from the sale of water is recognized at a point in time upon delivery to the customer when the performance obligation has been met. Additionally, customers are required to purchase caliche from the Company for the construction of access roads and well pads for which the Company receives a fixed-fee per cubic yard of caliche extracted from our surface acreage. Revenue from the sale of caliche is recognized at a point-in-time when the product is delivered. Revenues associated with resource sales for the three months ended June 30, 2026 and 2025 were approximately $28.2 million and $19.2 million, respectively, and $47.2 million and $24.2 million for the six months ended June 30, 2026 and 2025, respectively. Revenues associated with Resource sales - related party for the three months ended June 30, 2026 and 2025 were zero and $0.5 million, respectively, and $0.2 million and $0.5 million for the six months ended June 30, 2026 and 2025, respectively. Refer to Note 11 – Related Party Transactions for more information on related party revenues.

Surface use related revenues: Includes surface damage fees, mining revenues, and cattle sales, which are recognized at a point in time upon completion of the respective performance obligations, when the product or service is delivered to the customer. Surface damage fees are earned when the disturbance occurs or restoration services are rendered. Cattle sales are earned through the sale of the Company’s cattle inventory. Revenues associated with Surface use related revenues for the three months ended June 30, 2026 and 2025 were approximately $5.9 million and $3.2 million, respectively, and $9.0 million and $5.2 million for the six months ended June 30, 2026 and 2025, respectively. Additionally, the Company leases certain portions of its land to customers. Income from leases, easement rights, and a man camp is recognized over time as performance obligations are satisfied. Lease revenue has been included as part of our surface use related revenues in the unaudited condensed consolidated statements of operations. Lease revenues for the three months ended June 30, 2026 and 2025 were approximately $0.1 million and less than $0.1 million, respectively, and $0.1 million and $0.1 million for the six months ended June 30, 2026 and 2025, respectively.

Surface use royalties and surface use royalties - related party: The Company receives a royalty based on a percentage of gross revenue derived from the use of land and/or volumetric use of infrastructure installed on the Company’s land in exchange for rights of use of the Company’s land, one-time or annual payments and additional fees at each renewal period. The Company typically receives royalties from such operations throughout the lifecycle of customers’ activities on Company land. Surface use royalties include royalties from certain saltwater disposal wells (“SWDs”) on and off ranches and lease payments with a base rate from use of our subsurface pore space, third-party sales of recycled water, development and use of drilling sites, new and existing roads, pipeline easements and electric transmission easements. The Company recognizes royalty revenues when the performance obligations are met, which is based on volumes and / or the Company’s contractual royalty percentage. Certain

contracts with related parties under which the Company receives a royalty percentage for the use of the Company’s infrastructure include variable consideration that is dependent upon infrastructure usage or volumes and is typically constrained at the inception of the agreement but is resolved when the actual usage or volumes are known. The payments are typically received one or two months following the month of production. An accrual is made based on historical or estimated basis of the royalty and contract prices for amounts earned but not yet paid. Revenues associated with surface use royalties for the three months ended June 30, 2026 and 2025 were approximately $1.4 million and $1.0 million, respectively, and $2.2 million and $1.1 million for the six months ended June 30, 2026 and 2025, respectively. Revenues associated with surface use royalties - related party for the three months ended June 30, 2026 and 2025 were approximately $6.0 million and zero, respectively, and $6.0 million and zero for the six months ended June 30, 2026 and 2025, respectively. Refer to Note 11 – Related Party Transactions for more information on related party revenues.

The Company evaluates the nature of its contracts and uses judgment primarily in assessing when performance obligations are satisfied. Payment terms do not include significant financing.

In some instances, we may be entitled to receive payments in advance of satisfying our performance obligations under the contract. We recognize a liability for these payments in excess of revenue recognized within Deferred revenue in our unaudited condensed consolidated balance sheets. The following table shows a summary of deferred revenue activity:


	Six Months Ended June 30,
(in thousands)	2026			2025
Beginning balance	$	627		$	175
Payment received/accrued and deferred		25			31
Revenue recognized during the period		(450	)		(64	)
Ending balance	$	202		$	142

Concentrations of Credit Risk, Major Customers and Suppliers

The Company is subject to risk resulting from the concentration of its sales and receivables with several significant customers in the E&P industry. This concentration of customers may impact the Company’s overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions. Collateral is not normally required for credit extended in the form of accounts receivable to the Company’s customers.

The Company had significant concentrations in revenue from the following significant customers:


	Three Months Ended June 30,		Six Months Ended June 30,
	2026	2025	2026	2025
Customer A	18%	16%	14%	22%
Customer B	15%	20%	19%	17%
Customer C	13%	18%	12%	14%
Customer D	12%	*	*	*
Customer E	*	11%	*	12%

* Below 10%

The Company had significant concentrations in accounts receivable from the following significant customers:


	June 30, 2026	December 31, 2025
Customer A	45%	*
Customer B	16%	15%
Customer C	11%	23%
Customer D	*	15%
Customer E	*	14%
Customer F	*	12%

* Below 10%

The Company is dependent on third-party equipment manufacturers, distributors, and dealers for supplies, services, and supplemental water sourcing. The Company is dependent on the ability of its suppliers to provide equipment, products, and services on a timely basis

and on favorable pricing terms. Major suppliers are defined as those comprising more than 10% of the Company’s cost of sales and accounts payable.

The Company had concentrations of major suppliers within cost of sales as follows:


	Three Months Ended June 30,		Six Months Ended June 30,
	2026	2025	2026	2025
Supplier A	32%	12%	33%	11%
Supplier B	12%	*	*	*
Supplier C	*	*	11%	*
Supplier D	*	34%	*	35%
Supplier E	*	10%	*	*

The Company had concentrations of major suppliers within accounts payable as follows:


	June 30, 2026	December 31, 2025
Supplier A	40%	*
Supplier B	20%	*
Supplier C	13%	*
Supplier D	*	15%
Supplier E	*	34%

Debt Issuance Costs

The Company capitalized certain costs in connection with obtaining its borrowings, including lender, legal, advisory and accounting fees. Debt issuance costs associated with term loans are amortized over the term of the related loan using the effective interest method and are classified as a reduction of long term debt. The Company’s debt issuance costs associated with revolving credit facilities are amortized on a straight-line basis and presented within other non-current assets on the consolidated balance sheets. Debt issuance cost amortization is included in interest expense. Unamortized deferred loan costs associated with loans paid off or refinanced with different lenders are charged off in the period in which such an event occurs.

Income Taxes

The Company has elected to be treated as a corporation for U.S. federal income tax purposes and is subject to U.S. federal and state corporate income taxes. The Company had no activity or holdings prior to the IPO. U.S. federal income tax expense (benefit) included in the consolidated statements of operations is calculated primarily based on the Company's share of net income (loss) of OpCo, which is taxed as a partnership. State income tax expense (benefit) included in the consolidated statements of operations is primarily related to the Company’s share of OpCo’s income taxed in New Mexico and the Texas Franchise Tax liability applicable to the Company and OpCo on a consolidated basis. In addition, two of OpCo’s subsidiaries, Desert Ram South, Inc. (“Desert Ram South”) and Desert Ram South Ranch, Inc. (“DRSR”), are corporations subject to federal and state income tax. These two subsidiaries cannot file a consolidated federal income tax return with the Company and thus the Company calculates a separate income tax provision based on the subsidiaries own operations. The subsidiaries are included in the Company’s consolidated Texas Franchise Tax return.

Prior to the IPO, the Predecessor was treated as a partnership for US federal income tax purposes and therefore has not been subject to U.S. federal income tax at an entity level. As a result, the consolidated net income (loss) in our historical financial statements does not reflect the tax expense (benefit) we would have incurred if we were subject to U.S. federal income tax at an entity level during the periods prior to the IPO. Two of Predecessor’s subsidiaries, Desert Ram South and DRSR were corporations subject to federal and state income tax. Subsequent to the IPO, OpCo is treated as a partnership for U.S. federal income tax purposes, and as such, is not subject to U.S. federal income tax. Instead, taxable income is allocated to members, including the Company, and taxable income (loss) of OpCo is reported in the respective tax returns of its members.

The Company provides for income tax expense based on the liability method of accounting for income taxes. Deferred tax assets and liabilities are recorded based upon differences between the tax basis of assets and liabilities and their carrying values for financial reporting purposes and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The establishment of a valuation allowance requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. Under U.S. GAAP, the valuation allowance is recorded to reduce the Company’s deferred tax assets to an amount that is more likely than not to be realized and is based upon the uncertainty of the realization of certain federal and state deferred tax assets related to net operating loss carryforwards and other tax attributes. The ultimate realization of the deferred tax assets depends on the generation of sufficient taxable income.

The income tax provision reflects the full benefit of all positions that have been taken in the Company’s income tax returns, except to the extent that such positions are uncertain and fall below the recognition requirements. In the event that the Company determines that a tax position meets the uncertainty criteria, an additional liability or benefit will result. The amount of unrecognized tax benefit requires management to make significant assumptions about the expected outcomes of certain tax positions included in filed or yet to be filed tax returns. As of June 30, 2026 and 2025, the Company did not have any uncertain tax positions. Desert Ram South and DRSR’s tax filings for 2022 through 2025 are subject to audit by the federal and state taxing authorities in jurisdictions where we conduct business. None of the Company’s federal or state tax returns are currently under examination. In the event our tax filings are audited, we may be subject to assessments of additional taxes that are resolved with the authorities or through the courts.

Earnings (Loss) Per Share Attributable to EagleRock

The Company uses the two-class method in the computation of earnings per share. The Company’s RSUs include dividend equivalent rights that permit holders of granted but unvested RSUs to receive a non-forfeitable cash amount equal in value to dividends paid with respect to a specified number of shares and are contemplated as participating when the Company is in a net income position. These awards participate in dividend equivalents on a basis equivalent to other Class A shares.

Basic earnings (loss) per share (“EPS”) of Class A shares is computed on the basis of the weighted average number of shares outstanding during each period. The diluted EPS of Class A shares contemplates adjustments to the numerator and the denominator under the if-converted method for the convertible Class B shares. The Company uses the treasury stock method or two-class method when evaluating dilution for RSUs. The more dilutive of the two methods is included in the calculation for diluted EPS.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In 2025, we retrospectively adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require entities to disclose specific categories in the effective tax rate reconciliation and provide additional information for reconciling items where the effect of those reconciling items is equal to or greater than 5% of the amount computed by multiplying pretax income/loss by the applicable statutory income tax rate. In addition, entities are required to disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated by jurisdictions. This ASU is effective for annual periods beginning after December 15, 2024 with early adoption permitted. The adoption of this update did not have a material impact on the Company’s consolidated financial statements and related disclosures. Refer to Note 8 – Income Taxes.

Recent Accounting Pronouncements Not Yet Adopted

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software, which removed references to project stages and clarified when the Company is required to begin capitalizing eligible costs. The new guidance is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, with early adoption permitted. ASU 2025-06 may be applied retrospectively or prospectively. The Company is currently evaluating the effect of this updated standard on its consolidated financial statements and related disclosures.

In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarifies the effective date of ASU 2024-03 and does not change its underlying disclosure requirements. ASU 2024-03 requires tabular disclosure of specified natural expenses within certain income statement expense captions, a qualitative description of amounts not separately disaggregated and disclosure of our definition and total amount of selling expenses. The Company plans to adopt this guidance and comply with the disclosure requirements when it becomes mandatorily effective for annual periods beginning after December 15, 2026. The adoption of ASU 2024-03 is not expected to have any effect on the Company’s consolidated financial statements as it modifies disclosure requirements only.

In December 2025, FASB issued ASU 2025-12, Codification Improvements, which includes updates for a broad range of Accounting Topics arising from technical corrections, unintended application of the Codification, clarifications and other minor improvements. The Company plans to adopt this guidance and comply with the disclosure requirements when it becomes mandatorily effective for annual periods beginning after December 15, 2026. The Company is currently assessing the impact of this standard on its consolidated financial statements and related disclosures.