EagleRock Land, LLC

Previous wording

The historical financial information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects only the historical financial results of the Predecessor, and does not give pro forma effect to the DE Flow Contribution, the Shallow Valley Contribution, the Up-C Reorganization, or the IPO (as defined herein), each of which is described further below. Each of the DE Flow Contribution, the Shallow Valley Contribution, the Up-C Reorganization, and the IPO is reflected in the historical financial information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” solely from and after its respective completion.

Current wording

The historical financial information prior to May 15, 2026 in this“Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects only the historical financial results of the Predecessor and does not give pro forma effect to the DE Flow Contribution, the Shallow Valley Contribution, the Up-C Reorganization (as defined herein), or the IPO (as defined herein), each of which is described further below. Each of the DE Flow Contribution, the Shallow Valley Contribution, the IPO and the other transactions in the Corporate Reorganization (as defined herein) is reflected in the historical financial information in this ”Management’s Discussion and Analysis of Financial Condition and Results of Operations” solely from and after its respective date of completion.

Previous wording

We are a land management company that owns or controls approximately 236,000 acres in the heart of the Delaware and Midland sub-basins within the prolific Permian Basin. In addition, we have an interest in up to approximately 70,000 acres pursuant to an acreage dedication related to our Midland Basin water infrastructure assets. Our acreage is vital to the efficient development of oil and natural gas resources in the Permian Basin and is strategically located to support the growing surface, resource, infrastructure and related commercial development needs of the power and other emerging industries in the Permian Basin. We do not own the oil and gas mineral interests that underlie our surface acreage.

Current wording

We are a land management company that owns or controls approximately 286,000 acres in the heart of the Delaware and Midland sub-basins within the prolific Permian Basin. In addition, we have an interest in up to approximately 70,000 acres pursuant to an acreage dedication related to our Midland Basin water infrastructure assets. Our acreage is vital to the efficient development of oil and natural gas resources in the Permian Basin and is strategically located to support the growing surface, resource, infrastructure and related commercial development needs of the power and other emerging industries in the Permian Basin. We do not own the oil and gas mineral interests that underlie our surface acreage.

Previous wording

We received net proceeds from the IPO, including the underwriters' option, of approximately $328.5 million, net of underwriting discounts and offering expenses. We contributed all of the net proceeds from the IPO 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 the IPO. OpCo used a portion of the net proceeds from the IPO to repay in full and terminate the Predecessor Credit Facility and intends to use the remainder for general corporate purposes.

Current wording

We received net proceeds from the IPO, including the underwriters’ option, of approximately $334.2 million, net of underwriting discounts and offering expenses. We contributed all of the net proceeds from the IPO 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 the IPO. OpCo used a portion of the net proceeds from the IPO to repay in full and terminate the Predecessor Credit Facility and intends to use the remainder for general corporate purposes.

Previous wording

Following the Corporate Reorganization, we are the sole managing member of OpCo, are responsible for all operational, management and administrative decisions relating to OpCo's business and consolidate the financial results of OpCo and its subsidiaries. OpCo owns all of the outstanding membership interests in our operating subsidiaries and operates our assets through these various subsidiaries.

Current wording

Following the Corporate Reorganization, we are the sole managing member of OpCo, we are responsible for all operational, management and administrative decisions relating to OpCo’s business and we consolidate the financial results of OpCo and its subsidiaries. OpCo owns all of the outstanding membership interests in our operating subsidiaries and operates our assets through these various subsidiaries.

Previous wording

Each of the Predecessor, the existing owners of Shallow Valley Ranch (the “Shallow Valley Owners”) and Double Eagle IV Midco, LLC (“Double Eagle” and collectively, with the Predecessor and the Shallow Valley Owners, the “Existing Owners”) contributed cash to us in exchange for a total of 109,724,999 Class B shares;

Current wording

Each of the Predecessor, the existing owners of the Shallow Valley Ranch (the “Shallow Valley Owners”) and Double Eagle IV Midco, LLC (“Double Eagle” and collectively, with the Predecessor and the Shallow Valley Owners, the “Existing Owners”) contributed cash to us in exchange for a total of 109,724,999 Class B shares;

Previous wording

Each of EagleRock’s and OpCo’s operating agreements was amended and restated to facilitate the IPO (the transactions set forth in this and the second bullet point above being the “Up-C Reorganization”);

Current wording

Each of the Company’s and OpCo’s operating agreements was amended and restated to facilitate the IPO (the transactions set forth in this and the second bullet point above being the “Up-C Reorganization”);

Previous wording

Pursuant to a Warrant Exercise Agreement (the “Warrant Exercise Agreement”), each holder of warrants of the Predecessor (including funds and accounts managed by TCW Asset Management Company LLC, CCLF Holdings (D41) LLC and AWC Aqua, LLC (collectively, the “TCW Entities” and such warrants, the “Predecessor Warrants”)) exercised a portion of its Predecessor Warrants (the “Exercised Warrants”) and forfeited the remaining portion, which were irrevocably cancelled, immediately following which (i) the Predecessor distributed 14,939,952 OpCo Units and a corresponding number of Class B shares to the TCW Entities in redemption of the units of itself received in respect of the Exercised Warrants, (ii) each warrant agreement between the Predecessor and the TCW Entities was terminated and (iii) certain of such TCW Entities (the “Rollover TCW Entities”) merged with one or more newly formed subsidiaries of EagleRock and received one Class A share in exchange for each OpCo Unit (and Class B share) it held, or an aggregate 4,560,688 Class A shares;

Current wording

Pursuant to a Warrant Exercise Agreement (the “Warrant Exercise Agreement”), each holder of warrants of the Predecessor (including funds and accounts managed by TCW Asset Management Company LLC, CCLF Holdings (D41) LLC and AWC Aqua, LLC (collectively, the “TCW Entities” and such warrants, the “Predecessor Warrants”)) exercised a portion of its Predecessor Warrants (the “Exercised Warrants”) and forfeited the remaining portion, which were irrevocably cancelled, immediately following which (i) the Predecessor distributed 14,939,952 OpCo Units and a corresponding number of Class B shares to the TCW Entities in redemption of the units of itself received in respect of the Exercised Warrants, (ii) each warrant agreement between the Predecessor and the TCW Entities was terminated and (iii) certain of such TCW Entities (the “Rollover TCW Entities”) merged with one or more newly formed subsidiaries of the Company and received one Class A share in exchange for each OpCo Unit (and Class B share) it held, or an aggregate 4,560,688 Class A shares;

Previous wording

On May 15, 2026, concurrently with the closing of the IPO, Double Eagle contributed its interests in DE IV Flow, LLC ("DE Flow"), including the integrated water infrastructure system in the Midland Basin (the "DE Flow System"), to OpCo in exchange for 45,873,930 OpCo Units and a corresponding number of Class B shares (the "DE Flow Contribution"). The DE Flow System consists of produced water gathering systems, saltwater disposal wells, water sourcing and delivery pipelines and recycling facilities, and is capable of handling up to approximately 400 MBbls/d of produced water. The DE Flow Contribution was accounted for as a business combination under ASC 805.

Current wording

On May 15, 2026, concurrently with the closing of the IPO, Double Eagle completed the DE Flow Contribution, contributing its interests in DE Flow, including the DE Flow System, to OpCo in exchange for 45,873,930 OpCo Units and a corresponding number of Class B shares. The DE Flow System consists of a fully integrated water management system, saltwater disposal wells, water sourcing and delivery pipelines and recycling facilities, and is capable of handling up to approximately 400 MBbls/d of produced water. The DE Flow Contribution was accounted for as a business combination under ASC 805.

Previous wording

On May 15, 2026, concurrently with the closing of the IPO, the Shallow Valley Owners contributed their interests in the Shallow Valley Ranch ("Shallow Valley"), including approximately 41,000 surface acres in the Midland Basin and associated assets, to OpCo in exchange for 21,134,331 OpCo Units and a corresponding number of Class B shares (the "Shallow Valley Contribution"). The Shallow Valley Contribution was accounted for as a business combination under ASC 805.

Current wording

On May 15, 2026, concurrently with the closing of the IPO, the Shallow Valley Owners completed the Shallow Valley Contribution, contributing their interests in the entities that own Shallow Valley Ranch, which includes approximately 41,000 surface acres in the Midland Basin and associated assets, to OpCo in exchange for 21,134,331 OpCo Units and a corresponding number of Class B shares. The Shallow Valley Contribution was accounted for as a business combination under ASC 805.

Previous wording

On May 4, 2026, OpCo entered into the Credit Facility with JPMorgan Chase Bank, N.A. as administrative agent, and the lenders party thereto providing for a $200.0 million revolving credit facility. See “—Key Factors Affecting our Results of Operations—EagleRock Credit Facility” for additional information regarding the terms of the Credit Facility. The Effective Date (as defined in the Credit Facility) of the Credit Facility occurred on June 8, 2026.

Current wording

On May 4, 2026, OpCo entered into the Credit Facility with JPMorgan Chase Bank, N.A. as administrative agent, and the lenders party thereto providing for a $200.0 million revolving credit facility. See “—Key Factors Affecting Comparability and our Results of Operations—EagleRock Credit Facility” for additional information regarding the terms of the Credit Facility. The Effective Date (as defined in the Credit Facility) of the Credit Facility occurred on June 8, 2026.

Previous wording

The DE Flow WSMA, governing royalty revenue arrangements with respect to the DE Flow System, with (i) an initial term of 10 years, (ii) a royalty equal to 90% of the net proceeds (gross revenues less costs associated with operating the system) generated by the assets operated by DEF Operating, (iii) a minimum annual royalty of $40.0 million for the first five years of the initial term and $10.0 million for the last five years of the initial term, and (iv) support from an acreage dedication of up to approximately 70,000 acres related to our Midland Basin water infrastructure assets. Pursuant to 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 the IPO; and

Current wording

The DE Flow WSMA, governing royalty revenue arrangements with respect to the DE Flow System, with (i) an initial term of 10 years, (ii) a royalty equal to 90% of the net proceeds (gross revenues less costs associated with operating the system) generated by the assets operated by DEF Operating, LLC (“DEF Operating”), (iii) a minimum annual royalty of $40.0 million for the first five years of the initial term and $10.0 million for the last five years of the initial term, and (iv) support from an acreage dedication of up to approximately 70,000 acres related to our Midland Basin water infrastructure assets. Pursuant to 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 the IPO; and

Previous wording

The Hydrosource Recycling Agreement, a wholly owned subsidiary of an entity that shares common ownership with the Predecessor, governing royalty revenue arrangements with respect to recycled water activities on our land, with (i) an initial term of 10 years, (ii) a royalty equal to 31% of the gross selling price for each barrel of recycled water stored, treated, processed, recycled, disposed, purchased or sold on our land by Hydrosource less applicable taxes, (iii) a royalty equal to 5% of the gross selling price for each barrel of recycled water sold in New Mexico off our land, (iv) a $0.04 per barrel transit tariff for volumes of produced water or recycled water transported across our land solely for purposes of transit to a facility located outside of our land, (v) a royalty equal to 50% of the gross selling price received by Hydrosource less the amount paid to the supplier for produced water sourced pursuant to the Hydrosource Recycled Water Supply Agreement, (vi) Hydrosource's payment of 50% of the gross revenue received from the sale of skim oil recovered from the facilities or other operations on our land, (vii) a five-year minimum royalty commitment of $5.0 million per year and (viii) Hydrosource's two-year exclusive option to develop a solid waste facility on our land.

Current wording

The Hydrosource Recycling Agreement, governing royalty revenue arrangements with respect to recycled water activities on our land, with (i) an initial term of 10 years, (ii) a royalty equal to 31% of the gross selling price for each barrel of recycled water stored, treated, processed, recycled, disposed, purchased or sold on our land by Hydrosource less applicable taxes, (iii) a royalty equal to 5% of the gross selling price for each barrel of recycled water sold in New Mexico off our land (for a two-year period from the effective date of the agreement), (iv) a $0.04 per barrel transit tariff for volumes of produced water or recycled water transported across our land solely for purposes of transit to a facility located outside of our land, (v) a royalty equal to 50% of the gross selling price received by Hydrosource less the amount paid to the supplier for produced water sourced pursuant to the Hydrosource Recycled Water Supply Agreement, (vi) Hydrosource’s payment of 50% of the gross revenue received from the sale of skim oil recovered from the facilities or other operations on our land, (vii) a five-year minimum royalty commitment of $5.0 million per year and (viii) Hydrosource’s two-year exclusive option to develop a solid waste facility on our land.

Previous wording

Over the last several years, the global economy and the oil and natural gas industry have experienced considerable volatility driven by a range of macroeconomic and geopolitical factors. Global conflicts, ongoing ambiguity surrounding tariffs and international trade policies, domestic political developments, elevated inflation, higher interest rates and changing costs of capital have influenced business activity across the energy sector, contributing to broader economic uncertainty that continues to affect short-term and long-term development decisions of energy companies.

Current wording

Over the last several years, the global economy and the oil and natural gas industry have experienced considerable volatility driven by macroeconomic and geopolitical factors, including global conflicts, ongoing ambiguity surrounding tariffs and international trade policies, domestic political developments, elevated inflation and higher interest rates and costs of capital. More recently, the war in the Middle East involving the U.S., Israel and Iran, as well as other countries in the region, the situation in Venezuela, OPEC+ actions and evolving global supply-demand fundamentals have driven significant volatility in commodity prices. From December 31, 2024 to December 31, 2025, average WTI oil prices decreased approximately 14.7%, while average Henry Hub natural gas prices increased approximately 60.2%. During the first quarter of 2026, escalation of the conflict in the Middle East and related disruptions to global shipping routes caused oil prices to rise sharply, with the WTI posted price exceeding $94.0 per barrel as a result of production shut-ins, shipping interruptions and other uncertainties. As of June 30, 2026, the WTI posted price has retreated to approximately $70.6 per barrel.

Previous wording

Despite the significant volatility in the global oil market, we believe the outlook for energy and infrastructure development, particularly in the Permian Basin, remains favorable. The focus on energy independence is promoting continued activity in the U.S., which is expected to drive significant investment in infrastructure, especially in the prolific Permian Basin where our land and assets are located. U.S. energy policy developments, including Executive Orders promoting domestic energy production through expedited infrastructure approvals and reduced barriers to resource development, may further support investment and operational activity in the basin. At the same time, federal incentives for alternative and renewable energy technologies may accelerate the broader energy transition. Many of these emerging energy initiatives, similar to traditional oil and gas development, require substantial surface acreage and related infrastructure, positioning companies with significant land and infrastructure assets to benefit from both traditional and renewable energy sources.

Current wording

We also expect a number of trends to support continued investment in the Permian Basin. The focus on domestic energy independence is promoting continued activity in the U.S., and U.S. energy policy developments, including Executive Orders promoting domestic energy production through expedited infrastructure approvals and reduced barriers to resource development, may further support investment and operational activity in the Permian Basin. At the same time, federal incentives for alternative and renewable energy technologies, together with growing demand for power generation, data centers and other digital infrastructure, may accelerate the broader energy transition and create additional demand for large, contiguous tracts of land. Many of these emerging energy and infrastructure initiatives, similar to traditional oil and gas development, require substantial surface acreage and related infrastructure, positioning companies with significant land and infrastructure assets, such as us, to benefit from both traditional and emerging energy sources.

Previous wording

Significant financial and operating highlights of the Predecessor for the first quarter ended March 31, 2026 and 2025 include:

Current wording

Significant financial and operating highlights for the quarter ended June 30, 2026 and 2025 include:

Previous wording

Net income of $3.4 million, compared to a net loss of $1.1 million in the first quarter of 2025;

Current wording

Net loss of $37.5 million, compared to a net loss of $70.8 million in the second quarter of 2025;

Previous wording

Income from operations of $9.4 million, an increase of 487.4% as compared to the first quarter of 2025;

Current wording

Loss from operations of $53.2 million, compared to income from operations of $5.3 million in the second quarter of 2025

Previous wording

Free Cash Flow(1) of $13.0 million, compared to $2.2 million in the first quarter of 2025; and

Current wording

Free Cash Flow(1) of $22.4 million, compared to $(0.2) million in the second quarter of 2025; and

Previous wording

We generate revenue from multiple sources, including the use of our surface acreage, the sale of water and other resources from our land and our water handling infrastructure. The fees, royalty rates, payment structures and other commercial terms under our contracts are negotiated individually, reflecting the specific surface use, type of resource development, anticipated operational intensity and expected production or extraction volumes associated with each agreement. Further, the amount and composition of revenue we receive from a particular customer may vary significantly from period to period based on the nature, timing and scope of that customer’s activities on our land. We are focused on actively growing revenue from the use of our surface acreage and the sale of resources from our land. We believe that our largely fee-based SUAs, as well as our strong base of royalty fees, support cash flow stability through commodity price cycles.

Current wording

We generate revenue from multiple sources, including the use of our surface acreage, the sale of water and other resources from our land and royalties from our integrated water management system. The fees, royalty rates, payment structures and other commercial terms under our contracts are negotiated individually, reflecting the specific surface use, type of resource development, anticipated operational intensity and expected production or extraction volumes associated with each agreement. Further, the amount and composition of revenue we receive from a particular customer may vary significantly from period to period based on the nature, timing and scope of that customer’s activities on our land. We are focused on actively growing revenue from the use of our surface acreage and the sale of resources from our land. We believe that our largely fee-based surface use agreements (each an “SUA”), as well as our strong base of royalty fees, support cash flow stability through commodity price cycles.

Previous wording

The table below summarizes revenues of the Predecessor on a historical basis for the periods indicated:

Current wording

The table below summarizes revenues on a historical basis for the periods indicated:

Previous wording

Under the Produced Water Recycling Rights Agreement (the "Hydrosource Recycling Agreement") with Hydrosource Logistics, LLC ("Hydrosource") that was entered into in connection with the IPO, we receive a fee for each barrel of recycled water Hydrosource sells on our land and within certain designated areas outside of our land, and Hydrosource is required to generate minimum annual royalty revenue of $5.0 million from its activities during the initial five years of the agreement. The Company and Hydrosource have access to supplemental off-ranch water (either recycled or brackish water), and the Company’s surface pipeline has the capacity to move approximately 100 MBbls/d, or approximately 36.5 MMBbls per year, of off-ranch water from Texas to its land in New Mexico. Under the Hydrosource Recycling Agreement, we may designate to Hydrosource the rights to manage certain of our customers' brackish water demand for which we would expect to receive a royalty payment. Additionally, Hydrosource has a long-term agreement that provides it with access to up to 3 MMBbls/d of produced water for treatment and recycling within certain designated areas in the Permian Basin (the Hydrosource Recycled Water Supply Agreement").

Current wording

Under the Produced Water Recycling Rights Agreement (the “Hydrosource Recycling Agreement”) with Hydrosource Logistics, LLC (“Hydrosource”) that was entered into in connection with the IPO, we receive a royalty for each barrel of recycled water Hydrosource sells on our land and within certain designated areas outside of our land, and Hydrosource is required to generate minimum annual royalty revenue of $5.0 million from its activities during the initial five years of the agreement. The Company and Hydrosource have access to supplemental off-ranch water (either recycled or brackish water), and the Company’s surface pipeline has the capacity to move approximately 100 MBbls/d, or approximately 36.5 MMBbls per year, of off-ranch water from Texas to its land in New Mexico. Under the Hydrosource Recycling Agreement, we may designate to Hydrosource the rights to manage certain of our customers’ brackish water demand for which we would expect to receive a royalty payment. Additionally, Hydrosource has a long-term agreement that provides it with access to up to 3 MMBbls/d of produced water for treatment and recycling within certain designated areas in the Permian Basin (the “Hydrosource Recycled Water Supply Agreement”).

Previous wording

Additionally, pursuant to the Water System Management Agreement ("DE Flow WSMA") with DEF Operating, LLC ("DEF Operating") that was entered into in connection with the IPO, we receive revenue from our integrated water infrastructure system in the Midland Basin, which is operated by DEF Operating, LLC, an affiliate of Double Eagle Energy Holdings IV, LLC. The operating costs and maintenance expenses of these water infrastructure assets, which include produced water gathering systems, SWDs, water sourcing and delivery pipelines and recycling facilities, are primarily borne by DEF Operating, with minimal operating costs or capital expenditures borne by us.

Current wording

Additionally, pursuant to the Water System Management Agreement (“DE Flow WSMA”) with DEF Operating that was entered into in connection with the IPO, we receive revenue from our integrated water infrastructure system in the Midland Basin, which is operated by DEF Operating, an affiliate of Double Eagle Energy Holdings IV, LLC. The operating costs and maintenance expenses of these water infrastructure assets, which include produced water gathering systems, SWDs, water sourcing and delivery pipelines and recycling facilities, are primarily borne by DEF Operating, with minimal operating costs or capital expenditures borne by us.

Previous wording

General and Administrative Expenses. General and administrative expenses consist primarily of corporate personnel costs, including salaries, bonuses, service fees, payroll taxes and employee-related insurance. These expenses also include professional services such as legal, consulting and accounting fees, as well as information technology and software costs that support our corporate functions. Office-related expenses, such as rent, office equipment rentals, supplies, communications, bank charges and dues and subscriptions, represent an additional component of our administrative cost structure. We also incur various commercial insurance costs, including general liability, directors and officers insurance, umbrella liability, workers’ compensation, auto insurance and property insurance, along with other corporate overhead, such as marketing, travel, meals, vehicle lease expenses and miscellaneous administrative expenses. These costs reflect the resources required to manage our business, comply with regulatory and public company requirements and support the organizational infrastructure needed to execute our strategic objectives.

Current wording

General and Administrative Expenses. General and administrative expenses consist primarily of corporate personnel costs, including salaries, bonuses, service fees, payroll taxes, employee-related insurance, and share-based compensation. These expenses also include professional services such as legal, consulting and accounting fees, as well as information technology and software costs that support our corporate functions. Office-related expenses, such as rent, office equipment rentals, supplies, communications, bank charges and dues and subscriptions, represent an additional component of our administrative cost structure. We also incur various commercial insurance costs, including general liability, directors and officers insurance, umbrella liability, workers’ compensation, auto insurance and property insurance, along with other corporate overhead, such as marketing, travel, meals, vehicle lease expenses and miscellaneous administrative expenses. These costs reflect the resources required to manage our business, comply with regulatory and public company requirements and support the organizational infrastructure needed to execute our strategic objectives. Share-based compensation expense includes shares issued to certain members of management upon the completion of the IPO (“IPO Bonuses”), which are equity-classified awards and measured at fair value on the grant date, and RSUs issued under our long-term incentive plan (“LTIP”), which are recorded on grant date at fair value. See “Key Factors Affecting Comparability and Our Results of Operations—Long-Term Incentive Plan” below and Note 10—Share-Based Compensation to our unaudited condensed consolidated financial statements for additional information regarding share-based compensation.

Previous wording

Our ability to grow also depends on continued demand for access to our lands and associated surface rights by E&P operators, midstream providers and other energy and infrastructure users, which demand is closely linked to commodity price expectations, industry capital spending and basin-level capital allocation. If oil and natural gas prices remain depressed or volatile for an extended period, or if operators reallocate capital away from the Delaware or Midland basins where our properties are concentrated, we could experience slower growth in new surface-use arrangements, reduced renewals or expansions of existing agreements and intensified competition for fewer development opportunities. In particular throughput and related royalties from our Midland Basin produced-water handling network (operated by DEF Operating and currently designed for peak handling capacity of approximately 400 MBbls/d) depend on producer activity levels and the pace of tie-ins, constraints such as pore-space availability, recycling and injection permitting, supply-chain delays or deferrals of drilling and completion schedules can limit volumetric growth and associated payments to us notwithstanding contractual protections. More broadly, because a substantial portion of our revenues are activity-linked, arising from surface use fees, rights-of-way and easements, water sales, produced-water transportation, recycling and disposal royalties and resource sales (including caliche), industry slowdowns can directly reduce the number, timing and scale of projects undertaken on our land, negatively affecting our results of operations and our ability to execute our growth strategy.

Current wording

Our ability to grow also depends on continued demand for access to our lands and associated surface rights by E&P operators, midstream providers and other energy and infrastructure users, which demand is closely linked to commodity price expectations, industry capital spending and basin-level capital allocation. If oil and natural gas prices remain depressed or volatile for an extended period, or if operators reallocate capital away from the Delaware or Midland Basins where our properties are concentrated, we could experience slower growth in new surface-use arrangements, reduced renewals or expansions of existing agreements and intensified competition for fewer development opportunities. In particular, throughput and related royalties from our Midland Basin integrated water management system (operated by DEF Operating and currently designed for peak handling capacity of approximately 400 MBbls/d) depend on producer activity levels and the pace of tie-ins. In addition, constraints such as pore-space availability, recycling and injection permitting, supply-chain delays or deferrals of drilling and completion schedules can limit volumetric growth and associated payments to us notwithstanding contractual protections. More broadly, because a substantial portion of our revenues are activity-linked, arising from surface use fees, rights-of-way and easements, water sales, produced-water transportation, recycling and disposal royalties and resource sales (including caliche), industry slowdowns can directly reduce the number, timing and scale of projects undertaken on our land, negatively affecting our results of operations and our ability to execute our growth strategy.

Previous wording

As a result of the IPO, we incurred incremental, non-recurring costs associated with our transition to a publicly traded and taxable entity. These transition-related expenses include IPO-related professional fees and other IPO costs, as well as the initial design, documentation, implementation and testing of enhanced internal controls over financial reporting under the Sarbanes-Oxley Act ("SOX"). We also incurred one-time investments in governance structures and policies, board and committee operations, director onboarding and training and upgrades to financial reporting, disclosure and compliance systems necessary to support public company requirements.

Current wording

As a result of the IPO, we incurred incremental, non-recurring costs associated with our transition to a publicly traded and taxable entity. These transition-related expenses include IPO-related professional fees and other IPO costs, as well as the initial design, documentation, implementation and testing of enhanced internal controls over financial reporting under the Sarbanes-Oxley Act. We also incurred one-time investments in governance structures and policies, board and committee operations, director onboarding and training and upgrades to financial reporting, disclosure and compliance systems necessary to support public company requirements.

Previous wording

We were formed solely to serve as the issuer in the IPO and, other than activities related to the IPO, have not conducted any material business operations to date. As a result, the historical consolidated financial statements and other historical financial information included in this Quarterly Report are based on the results of the Predecessor prior to the Corporate Reorganization in connection with the IPO. As a result, the historical consolidated financial data may not give you an accurate indication of what our actual results would have been if the Corporate Reorganization had been completed at the beginning of the periods presented or of what our future results of operations are likely to be. See “—Recent Developments — Corporate Reorganization”

Current wording

We were formed solely to serve as the issuer in the IPO and have no previous operations, assets or liabilities. As a result, the historical consolidated financial statements and other historical financial information prior to May 15, 2026 included in this Quarterly Report are based on the results of the Predecessor prior to the Corporate Reorganization. Accordingly, the historical consolidated financial data may not give you an accurate indication of what our actual results would have been if the Corporate Reorganization had been completed at the beginning of the periods presented or of what our future results of operations are likely to be. See ”—Recent Developments — Corporate Reorganization.”

Previous wording

Concurrently with the closing of the IPO, we consummated the Corporate Reorganization, through which we acquired significant surface acreage and water infrastructure assets that expanded our operating footprint and revenue-generating asset base. See "—Recent Developments — Corporate Reorganization" for more information on these acquisitions. These transactions will be accounted for in accordance with applicable GAAP, which may result in recognition of identifiable intangible assets and property, plant and equipment of the accounting acquirees at fair value and included differences in the timing and classification of acquisition-related costs depending on the final accounting conclusion. As a result, our post-IPO results will reflect a larger asset base and a different mix of revenues and expenses than those presented in the Predecessor’s financial statements.

Current wording

Concurrently with the closing of the IPO, we consummated the Corporate Reorganization, through which we acquired significant surface acreage and water infrastructure assets that expanded our operating footprint and revenue-generating asset base. See “—Recent Developments — Corporate Reorganization” for more information on these acquisitions. These transactions were accounted for in accordance with applicable GAAP, which resulted in the recognition of identifiable intangible assets and property, plant and equipment of the accounting acquirees at fair value and included differences in the timing and classification of acquisition-related costs. As a result, our post-IPO results reflect a larger asset base and a different mix of revenues and expenses.

Previous wording

These acquisitions will impact the comparability of our results of operations across periods. In particular, we expect changes in depreciation and amortization expense associated with the fair value step-up in the carrying value of the acquired assets (if applicable), incremental operating and maintenance costs tied to the newly acquired water infrastructure and potential changes in revenue composition and margins as utilization ramps and commercial terms across the combined asset base are harmonized. We may also incur one-time integration and transition-related expenses, including costs to align systems, processes and contracts; rationalize overlapping functions; and implement common safety, environmental and operational standards. Accordingly, results in periods following the Corporate Reorganization may not be comparable to our historical results.

Current wording

These acquisitions impact the comparability of our results of operations across periods. In particular, we incurred changes in depreciation and amortization expense associated with the fair value step-up in the carrying value of the acquired assets (if applicable), incremental operating and maintenance costs tied to the acquired water infrastructure and changes in revenue composition and margins as utilization ramps and commercial terms across the combined asset base are harmonized. We may also incur one-time integration and transition-related expenses, including costs to align systems, processes and contracts; rationalize overlapping functions; and implement common safety, environmental and operational standards. Accordingly, results in periods following the Corporate Reorganization may not be comparable to our historical results.

Previous wording

On May 4, 2026, OpCo entered into a credit agreement (the "Credit Facility") with JPMorgan Chase Bank, N.A. as administrative agent, and the lenders party thereto. The Effective Date (as defined in the Credit Facility) of the Credit Facility was June 8, 2026. The Credit Facility provides for a senior secured revolving credit facility in an aggregate principal amount of up to $200.0 million, including a $10.0 million letter of credit sublimit, together with the ability to request increases in the commitments of up to an additional $100.0 million; provided that any such request for an increase must be in a minimum amount of $25.0 million and is limited to a maximum of four such requests. The Credit Facility and all borrowings thereunder will mature on June 8, 2031. Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the borrower’s option, the Term SOFR Rate (as defined in the Credit Facility) or Daily Simple SOFR (as defined in the Credit Facility), plus an applicable margin ranging from 2.25% to 3.00%, depending on OpCo’s Net Total Leverage Ratio (as defined in the Credit Facility). The Credit Facility includes a commitment fee on undrawn amounts ranging from 0.375% to 0.50%. The Credit Facility contains customary affirmative and negative covenants, as well as financial covenants requiring maintenance of a minimum Interest Coverage Ratio of 2.75:1.00 and a maximum Net Total Leverage Ratio of 3.50:1.00 (or 4.00:1.00 following a Material Permitted Acquisition (as defined in the Credit Facility)), and contains customary affirmative covenants, and events of default. The Credit Facility remains undrawn, with no letters of credit outstanding, as of the date the Company's financials were able to be issued.

Current wording

Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the borrower’s option, the Term SOFR Rate (as defined in the Credit Facility) or Daily Simple SOFR (as defined in the Credit Facility), plus an applicable margin ranging from 2.25% to 3.00%, depending on OpCo’s Net Total Leverage Ratio (as defined in the Credit Facility). The Credit Facility includes a commitment fee on undrawn amounts ranging from 0.375% to 0.50%. The Credit Facility contains customary affirmative and negative covenants, as well as financial covenants requiring maintenance of a minimum Interest Coverage Ratio of 2.75:1.00 and a maximum Net Total Leverage Ratio of 3.50:1.00 (or 4.00:1.00 following a Material Permitted Acquisition (as defined in the Credit Facility)), and customary events of default. As of June 30, 2026, the Credit Facility was undrawn, with no letters of credit outstanding.

Previous wording

In order to incentivize individuals providing services to us or our affiliates, our board of directors adopted a Long Term Incentive Plan ("LTIP"), which became effective upon the closing of the IPO, for employees and directors. Any individual who is our officer or employee or an officer or employee of any of our affiliates, and any other person who provides services to us or our affiliates, including our directors, are eligible to receive awards under the LTIP at the discretion of our board of directors or a committee thereof, as applicable. The LTIP provides for the grant, from time to time, at the discretion of our board of directors, or a committee thereof, of options, share appreciation rights, restricted shares, restricted share units, share awards, dividend equivalents, other share-based awards, cash awards, substitute awards and performance awards intended to align the interests of employees, directors and service providers with those of our shareholders. Our historical financial data may not present an accurate indication of what our actual results would have been if we had implemented the LTIP program prior to the periods presented within this Quarterly Report.

Current wording

In order to incentivize individuals providing services to us or our affiliates, our board of directors adopted an LTIP, which became effective upon the closing of the IPO, for employees and directors. Any individual who is our officer or employee or an officer or employee of any of our affiliates, and any other person who provides services to us or our affiliates, including our directors, are eligible to receive awards under the LTIP at the discretion of our board of directors or a committee thereof, as applicable. The LTIP provides for the grant, from time to time, at the discretion of our board of directors, or a committee thereof, of options, share appreciation rights, restricted shares, restricted share units, share awards, dividend equivalents, other share-based awards, cash awards, substitute awards and performance awards intended to align the interests of employees, directors and service providers with those of our shareholders. Our historical financial data may not present an accurate indication of what our actual results would have been if we had implemented the LTIP program at the beginning of the periods presented within this Quarterly Report.

Previous wording

Prior to the IPO, we and our subsidiaries were primarily entities that were treated as partnerships for federal income tax purposes. Accordingly, there is no provision or accrual for income taxes for federal and state income tax purposes included in the Predecessor's financial statements attributable to the passthrough income. However, as a result of the corporate status of Desert Ram South, Incorporated. ("Desert Ram South"), the Company has historically accrued federal and state income taxes related to Desert Ram South’s taxable earnings.

Current wording

Prior to the IPO, we and our subsidiaries were primarily entities that were treated as partnerships for federal income tax purposes. Accordingly, there is no provision or accrual for income taxes for federal and state income tax purposes included in the Predecessor’s financial statements attributable to the passthrough income. However, as a result of the corporate status of Desert Ram South, Inc. (“Desert Ram South”) and Desert Ram South Ranch, Inc. (“DRSR”), the Company has historically accrued federal and state income taxes related to Desert Ram South’s and DRSR’s taxable earnings.

Previous wording

As a result of our predominately non-taxable structure historically, income taxes on taxable income or losses realized by the Predecessor were generally the obligation of the individual members or partners, with the exception of Desert Ram South. Accordingly, the financial data attributable to the Predecessor contains no provision for U.S. federal income taxes or income taxes in any state or locality (other than as it relates to Desert Ram South.). Following closing of the IPO, although we are a limited liability company, we have elected to be taxed as a corporation and will be subject to U.S. federal, state and local income taxes.

Current wording

As a result of our predominately non-taxable structure historically, income taxes on taxable income or losses realized by the Predecessor were generally the obligation of the individual members or partners, with the exception of Desert Ram South and DRSR. Accordingly, the financial data attributable to the Predecessor contains no provision for U.S. federal income taxes or income taxes in any state or locality (other than as it relates to Desert Ram South and DRSR). Following closing of the IPO, although we are a limited liability company, we have elected to be taxed as a corporation and are subject to U.S. federal and state income taxes.

Previous wording

During the three months ended March 31, 2026, we recognized a non-recurring $3.3 million gain on net investment in sales-type lease related to the C-Store lease on our acreage upon completion of the construction and commencement of the lease. This gain is not expected to recur in future periods.

Current wording

During the six months ended June 30, 2026, we recognized a non-recurring $3.3 million gain on net investment in sales-type lease related to the C-Store lease on our acreage upon completion of the construction and commencement of the lease. This gain is not expected to recur in future periods.

Previous wording

Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Current wording

Resource sales. Resource sales increased by $8.5 million, or 43.1%, to $28.2 million for the three months ended June 30, 2026, as compared to $19.7 million for the three months ended June 30, 2025. The increase was largely attributable to a $13.7 million increase in fresh water sales, of which the Accelerated Acquisition contributed $11.2 million during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. An additional $0.9 million of the fresh water increase related to the Shallow Valley Contribution, which was not present in the three months ended June 30, 2025. The increase was partially offset by a $5.0 million decrease in recycled water sales due to the Hydrosource Distribution, as the Company no longer directly sells recycled water to customers, and a further $0.3 million decrease in caliche sales.

Previous wording

Interest expense. Interest expense increased by $3.1 million, or 115%, to $5.8 million for the three months ended March 31, 2026 as compared to $2.7 million for the three months ended March 31, 2025. The increase was primarily attributable to having a higher average borrowing amount under the Predecessor Credit Facility during the three months ended March 31, 2026, as compared to borrowings under our then-existing debt instruments for the three months ended March 31, 2025. This is partially offset by the amortization of $2.5 million of debt premium amortization in the three months ended March 31, 2026 as compared to $0.2 million of debt discount amortization for the three months ended March 31, 2025. See “—Liquidity and Capital Resources” for additional information regarding the Company’s debt instruments and interest expense.

Current wording

Interest expense. Interest expense decreased by $1.3 million, or 20.7%, to $4.8 million for the three months ended June 30, 2026, as compared to $6.1 million for the three months ended June 30, 2025. The decrease was primarily attributable to a decrease in the average outstanding debt balance during the period, as all outstanding debt under the Predecessor Credit Facility was paid off using the proceeds from the IPO. See ”—Liquidity and Capital Resources” for additional information regarding the Company’s debt instruments and interest expense.

Previous wording

Gain on investment in sales-type lease. During the three months ended March 31, 2026, we recognized a non-recurring and non-cash gain of $3.3 million on net investment in sales-type lease related to the C-Store lease on our acreage. The C-Store lease was classified as a sales-type lease during the period following the completion of construction in February 2026, with the gain reflecting the excess of the present value of the future lease payments over the fair value of the land derecognized. No comparable gain was recognized in the three months ended March 31, 2025.

Current wording

Gain on investment in sales-type lease. During the six months ended June 30, 2026, we recognized a non-recurring and non-cash gain of $3.3 million on net investment in sales-type lease related to the C-Store lease on our acreage. The C-Store lease was classified as a sales-type lease during the period following the completion of construction in February 2026, with the gain reflecting the excess of the present value of the future lease payments over the fair value of the land derecognized. No comparable gain was recognized in the six months ended June 30, 2025.

Previous wording

Adjusted EBITDA and Adjusted EBITDA Margin are used by our management and by external users of our financial statements, such as investors, research analysts and others, to assess the financial performance of our assets over the long term to generate sufficient cash to return capital to equity holders or service indebtedness. We define Adjusted EBITDA as net income (loss) minus interest, taxes, depreciation, amortization, depletion and accretion, which we refer to as “EBITDA” and from which we further deduct share-based compensation, non-recurring transaction-related expenses and other non-cash or non-recurring expenses. We define Adjusted

Current wording

Adjusted EBITDA and Adjusted EBITDA Margin are used by our management and by external users of our Financial Statements, such as investors, research analysts and others, to assess the financial performance of our assets over the long term to generate sufficient cash to return capital to equity holders or service indebtedness. We define Adjusted EBITDA as net income (loss) minus interest, taxes, depreciation, amortization, depletion and accretion, which we refer to as “EBITDA” and from which we further deduct share-based compensation, non-recurring transaction-related expenses and other non-cash or non-recurring expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues.

Previous wording

(1) Transaction-related expenses consist of nonrecurring professional services expenses, including banker fees, legal and professional fees and integration costs directly attributable to completed or contemplated transactions. We do not adjust for ongoing integration or optimization costs unless they are incremental, and directly attributable to the transaction.

Current wording

(1) Transaction-related expenses consist of non-recurring professional services expenses, including banker fees, legal and professional fees and integration costs directly attributable to completed or contemplated transactions, including the IPO. We do not adjust for ongoing integration or optimization costs unless they are incremental, and directly attributable to the transaction.

Previous wording

(2) Other consists of a loss on sale of property, plant and equipment for the three months ended March 31, 2025.

Current wording

(2) Other consists of loss on sale of assets.

Previous wording

Free Cash Flow and Free Cash Flow Margin are performance measures used by our management and by external users of our financial statements, such as investors, research analysts and others, to assess our ability to generate cash from operations to repay our indebtedness, return capital to our shareholders and fund potential acquisitions without access to external sources of financing for such purposes. To calculate Free Cash Flow, net income is adjusted by the same items discussed above for EBITDA and Adjusted EBITDA and then further adjusted by deducting incurred capital expenditures, which includes changes in accounts payable related to capital expenditures. Free Cash Flow Margin is calculated as Free Cash Flow divided by total revenues.

Current wording

Free Cash Flow and Free Cash Flow Margin are performance measures used by our management and by external users of our Financial Statements, such as investors, research analysts and others, to assess our ability to generate cash from operations to repay our indebtedness, return capital to our shareholders and fund potential acquisitions without access to external sources of financing for such purposes. To calculate Free Cash Flow, net income is adjusted by the same items discussed above for EBITDA and Adjusted EBITDA (other than interest expense and income tax expense / benefit) and then further adjusted for incurred capital expenditures, changes in accounts payable related to capital expenditures, non-cash interest expense, and non-cash tax expense. Free Cash Flow Margin is calculated as Free Cash Flow divided by total revenue.