EagleRock Raises 2026 EBITDA Outlook, Expands Midland Basin

EagleRock Land, LLC (EROK) raised its full-year 2026 adjusted EBITDA guidance to $133 million to $137 million after generating $34 million of adjusted EBITDA in the third quarter, marking the company’s second consecutive increase to its annual outlook. The surface-land management company also expanded its Midland Basin position through a new 35,000-acre dedication and two bolt-on acquisitions, adding potential royalty and water-related revenue streams.

Third-quarter revenue totaled $43 million, while GAAP net income was $11.3 million. Adjusted EBITDA reached $34 million, representing a 78% margin. Free cash flow was $31.8 million, equivalent to 93% of adjusted EBITDA, as the company’s capital expenditures remained limited to about $1.1 million.

The latest guidance includes the Intrepid acquisition and normalizing adjustments for the first two quarters of 2026. EagleRock’s corporate reorganization and initial public offering closed on May 15, meaning reported results before that date reflected a predecessor structure. The company presented normalized first-half figures as though it had operated under its post-IPO structure throughout the period.

Royalties and surface-use revenue support quarterly results

Surface-use royalties were EagleRock’s largest third-quarter revenue category at $19 million, up from normalized revenue of $15 million in each of the first two quarters. These royalties include payments tied to produced-water handling, recycled water, saltwater disposal, water transfers and other commercial uses of the company’s land and resources.

Resource sales contributed $13 million, compared with normalized amounts of $16 million in the first quarter and $24 million in the second. Surface-use revenue increased to $11 million from normalized revenue of $7 million in the second quarter and $4 million in the first. These payments are generated from activities such as access agreements, well pads, pipelines, utility easements and other infrastructure development.

Total third-quarter water volumes were 69 million barrels, comprising 22 million barrels of brackish water, 35 million barrels of recycled water and 12 million barrels of produced water.

Midland Basin expansion adds capital-light growth opportunities

EagleRock signed an agreement with Double Eagle V covering an additional approximately 35,000 dedicated acres in the Midland Basin. The transaction increases Double Eagle’s total acreage dedicated to EagleRock in the basin by about 50% to roughly 105,000 acres.

The company expects the dedication to begin making a significant revenue contribution in 2027, followed by further growth in later years. EagleRock said the arrangement can generate additional royalty revenue without requiring capital investment from the company.

EagleRock also acquired about 2,000 Midland Basin acres through two transactions totaling approximately $15 million. The purchases, completed at less than 10 times EBITDA, are adjacent to the Double Eagle V dedication and Shallow Valley footprints. Management said the assets expand water supply, storage and handling capabilities while creating opportunities tied to integration, sand development and increased produced-water volumes.

Separately, the company signed a lease for sand-mine development on Intrepid Ranch. EagleRock expects the project to establish a royalty stream based on sand volumes and generate incremental water sales for mining operations. It is also in late-stage negotiations with midstream companies on multiple acid-gas injection projects in New Mexico, although those agreements have not yet been completed.

Cash flow supports debt reduction

EagleRock ended September with $70 million of total debt, $12 million of cash and equivalents, and $58 million of net debt. Net leverage was 0.4 times adjusted EBITDA, based on the midpoint of its full-year outlook. Available liquidity totaled $142 million, including cash and $130 million of undrawn revolving-credit capacity.

By October 31, the company had repaid $20 million of revolver borrowings associated with the Intrepid acquisition, representing about 25% of the acquisition-related debt outstanding when the transaction was announced in August. EagleRock said its balance-sheet capacity supports a disciplined acquisition strategy focused on assets with a strategic fit and opportunities for active land management.

The outlook remains subject to customer development activity, energy demand, commodity-price volatility and the ability of operating partners to execute their plans. Other identified uncertainties include customer and geographic concentration, access to capital, permitting, changes in land-use and environmental regulations, the integration of acquired acreage, title defects, severe weather and cybersecurity threats. The expected benefits from the Double Eagle V dedication and other development projects are forward-looking and may differ from current management expectations.