United States securities and exchange commission logo
November 8, 2023
Steven R. Jones
Co-Chief Executive Officer
LandBridge Co LLC
5555 San Felipe Street, Suite 1200
Houston, TX 77056
Re: LandBridge Co LLC
Draft Registration
Statement on Form S-1
Submitted October
11, 2023
CIK No.: 0001995807
Dear Steven R. Jones:
We have reviewed your
draft registration statement and have the following comments.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe a comment applies to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to this
letter and your amended
draft registration statement or filed registration statement, we may
have additional comments.
Draft Registration Statement on Form S-1
Cover Page
1. Please revise the fifth
bullet to disclose that NDB Parent has director designation rights,
including the right to
designate more than a majority of the board for so long as it and its
affiliates beneficially
own at least 40% of your outstanding common shares, and whether
you will elect to not
comply with certain NYSE requirements. Also revise your disclosure
in the fourth bullet on
page 25 to clarify that NDB Parent continues to have a variation of
the director
designation rights so long as it owns at least 10% of your outstanding
common shares, and that
it also has the ability to appoint the same number of board
observers as it does
director designees, as you further discuss on page 159.
Industry Data, page iii
2. We refer to your
statements that you cannot assure investors of the accuracy or the
completeness of market
and industry data, and that you have not independently verified
Steven R. Jones
FirstName
LandBridgeLastNameSteven R. Jones
Co LLC
Comapany 8,
November NameLandBridge
2023 Co LLC
November
Page 2 8, 2023 Page 2
FirstName LastName
the third-party information. These statements imply an inappropriate
disclaimer of
responsibility with respect to this information. Please either delete
these statements or
specifically state that you are responsible for such information.
Summary, page 1
3. We note your disclosure that you currently own 72,000 surface acres
and that you also
own 8,000 net mineral acres, which "largely underlie [y]our surface
acreage." Please
revise to clarify whether the reference to surface acres includes any
mineral rights that
may underlie the surface acres.
Our Assets
Our Core Position, page 4
4. We note the figure presenting the Hydrocarbon Resources Near Our
Core Position
appears to illustrate the distribution of Oil EUR based on a
high and low metric
using bbl/ft. Please expand the discussion accompanying this
figure to explain in
reasonable detail the use of and basis for presenting EUR expressed as
bbl/ft. This
comment also applies to the disclosure on page 116.
5. We note the disclosure on pages 15, 102 and 124 of 7,660
high-probability undrilled well
locations within a 10-mile radius of your surface acreage appears to
be inconsistent with
the figure in the table on page 103 and does not appear consistent
with the figures relating
to such locations provided on pages 4 and 7. Please revise your
disclosure as necessary to
resolve these inconsistencies or tell us why a revision is not needed.
Sources of Revenue
Resource Sales and Royalties, page 9
6. Please revise to balance your disclosure by explaining that there is a
limited number of
potential customers on or near your land and that you compete for
customers with
adjacent landowners, as you reference on page 40.
Our Relationship with Desert Environmental, page 13
7. We refer to your statements that Desert Environmental is developing
two environmental
remediation facilities and that you will earn revenue from a variety
of sources, including
waste disposal. To the extent correct, please revise to balance your
disclosures to explain
that this development is in the early stages, and provide some context
to investors to
understand the duration of time for this development. In this regard,
we note that you
disclose on page 161 you received less than $100,000 of fees from
Desert Environmental.
We also note you state that you are coordinating to develop
"best-in-class" integrated non-
hazardous oilfield reclamation and solid waste facilities on your land
with Desert
Environmental. As you are currently in the development stages of the
project, please
explain why it is appropriate to refer to these facilities as
"best-in-class."
Steven R. Jones
FirstName
LandBridgeLastNameSteven R. Jones
Co LLC
Comapany 8,
November NameLandBridge
2023 Co LLC
November
Page 3 8, 2023 Page 3
FirstName LastName
Corporate Reorganization, page 18
8. We note your disclosure that following the Corporate Reorganization,
LandBridge will be
the sole managing member of OpCo, and will be responsible for all
operational,
management and administrative decisions relating to OpCo s business
and will
consolidate financial results of OpCo and its subsidiaries. We further
note your disclosure
on page iii, that your ownership of OpCo Units will initially
represent a minority share of
OpCo and that you expect that the NDB Parent will initially hold a
majority of the
economic interest in OpCo, as a non-controlling interest holder,
through its ownership of a
majority of the outstanding OpCo Units immediately after the closing
of this offering.
Furthermore, we note that as result NDB Parent will directly control
you, and, as a result,
will indirectly control OpCo through its ownership of Class B shares
that represent a
majority of your outstanding common shares. In order to better
understand your intended
future accounting please provide us with your analysis under ASC 810
under both the
variable interest or voting interest models such that you were able to
conclude that you
will consolidate OpCo directly rather than NDB Parent.
Redemption Right, page 20
9. We note your disclosure that there is also a call right for OpCo
Units. Please revise to
clarify under what circumstances you will have this right.
Organizational Structure, page 23
10. Please revise the diagram to explain the proposed reorganization, such
as by including a
diagram of the current structure. Please also revise to explain how
the ownership structure
reflected in the diagram is "simplified," and tell us the approximate
anticipated ownership
split between you and NDB Parent. Please also expand your discussion
on page 159 of the
material terms of the Contribution Agreement and file such agreement
as an exhibit.
Risk Factors, page 36
11. We note your risk factor disclosure that as a holding company you will
have no material
assets other than your equity interest in OpCo. You also state that
OpCo will be classified
as a partnership for federal income tax purposes. Please expand on
your risk factor
disclosure to describe any material, adverse tax consequences of the
OpCo partnership.
12. Please expand your disclosure to include a risk factor addressing the
uncertainty in the
estimation of proved of oil and natural gas reserves and future net
cash flows relating to
your mineral interests.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 88
13. Please update your results of operations to provide a discussion of
results for each of the
periods presented based on comparable prior periods. In that regard,
your discussion
Steven R. Jones
FirstName
LandBridgeLastNameSteven R. Jones
Co LLC
Comapany 8,
November NameLandBridge
2023 Co LLC
November
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FirstName LastName
should provide a discussion comparing your results of operations for
the years ended
December 31, 2022 and December 31, 2021 in addition to the discussion
comparing your
results of operations for the nine months ended September 30, 2023
with the comparable
nine months ended September 30, 2022. See Item 303 of Regulation S-K.
Industry
Hydrocarbon Value Chain, page 102
14. We note you disclose certain undrilled development locations in the
table on page 103 and
elsewhere in your filing based on probability. Please expand your
disclosure to clarify
what the application of probability is measuring in relationship
to the disclosure of these
locations and explain how the differing levels of probability, e.g. a
high-probability or
medium-probability, was determined and assigned to individual
locations. As part of your
expanded disclosure also include an explanation for what the line item
Other Potential
represents.
Our Core Position, page 115
15. We refer to your discussion of the agreement with TPL, which you state
provides
reciprocal crossing rights and royalty and revenue sharing. Please
expand on your
disclosure to describe the material terms of the agreement, and file
such agreement as an
exhibit.
Business
Our Mineral Interests, page 117
16. Please expand your mineral interest disclosures to include a proved
reserves table
presenting your net proved developed, proved undeveloped reserves and
total proved
reserves broken out by oil, NGLs and natural gas volumes. Refer to
disclosure
requirements in Item 1202(a) of Regulation S-K.
This comment also applies to the Analysis of Changes in Proved
Reserves on page F-
37. Refer to disclosure requirements in FASB ASC 932-235-50-4.
17. Please expand your disclosure of proved undeveloped reserves to
present the material
changes in the net quantities that occurred during the year. Include a
detailed narrative to
reconcile the overall change by separately identifying and quantifying
each contributing
factor, including offsetting factors, so that the changes in net
proved undeveloped reserves
between periods are fully explained including volume changes due to
extensions, costs,
commodity prices, royalty interest adjustments, well performance,
transfers to developed,
sales and acquisitions, unsuccessful and/or uneconomic proved
undeveloped locations, or
the removal of proved undeveloped locations due to changes in
development plans. Refer
to the disclosure requirements in Item 1203(a) and (b) of Regulation
S-K
This comment also applies to the explanations provided in conjunction
with the
reconciliation of the changes presented in the Analysis of Changes
in Proved Reserves
Steven R. Jones
LandBridge Co LLC
November 8, 2023
Page 5
on page F-37. Refer to the disclosure requirements in FASB ASC
932-235-50-5.
18. We note that, as of December 31, 2022, you disclose significant
quantities of proved
undeveloped reserves in comparison to your proved developed reserves.
We also note
from disclosure on page 37 that all decisions as to the investments
in, and production
from, wells in which you hold a mineral interest are dependent upon
decisions made by
the producers. As a result, you cannot control whether a producer
chooses to develop a
property or the success of drilling and development activities, which
depend on a number
of factors under the control of the producer. Furthermore, disclosure
on page 99 indicates
you monitor drilling and completion activity on your mineral acreage
using publicly
available sources in order to determine when new royalty interest
production may be
coming online.
Based on the disclosure that your oil and gas ownership consist of
royalty interests only
and the limitations noted on pages 37 and 99, please expand your
disclosure to provide a
detailed explanation for the methodology you used in the determination
of your proved
developed and undeveloped reserves.
Supplementally, tell us how you concluded that the estimates disclosed
as of December
31, 2022 complied with the requirements for reasonable certainty and
disclosure as proved
reserves. Refer to the definitions of reasonable certainty, proved oil
and gas reserves and
undeveloped reserves in Rule 4-10(a)(24), (a)(22) and (a)(31) of
Regulation S-X,
respectively, in formulating your response.
19. Please expand your disclosure to provide the information required by
Items 1202(a)(6)
and (a)(7) of Regulation S-K, respectively.
20. Please expand the disclosure in your filing to provide the annual
volumes of production by
final product sold for each of the last three fiscal years, including
the disclosure of natural
gas liquids production if sold separately. Additionally provide the
average sales prices by
final product sold and the average production cost per unit of
production. Refer to the
disclosure requirements in Item 1204 of Regulation S-K.
Properties, page 127
21. Please expand your disclosure to provide the information required by
Items 1205 and
1206 of Regulation S-K, respectively. As part of your expanded
disclosure also include
the information relating to 1) the total number of gross and net
productive wells,
expressed separately for oil and gas, 2) the total gross and net
developed and undeveloped
mineral acreage in which you own an interest, and 3) any undeveloped
mineral acreage
subject to expirations. Refer to the definitions and disclosure
requirements in Item 1208 of
FirstName LastNameSteven R. Jones
Regulation S-K. For the purposes of disclosing net royalty wells and
acres in which you
Comapany NameLandBridge
do not Co LLC consider the net revenue interest as a
substitute for the
hold a working interest,
working
November interest.
8, 2023 Page 5
FirstName LastName
Steven R. Jones
FirstName
LandBridgeLastNameSteven R. Jones
Co LLC
Comapany 8,
November NameLandBridge
2023 Co LLC
November
Page 6 8, 2023 Page 6
FirstName LastName
Customers; Material Contracts and Marketing, page 128
22. We note your disclosure that your five largest customers comprised
approximately 46% of
the total revenue for the 2022 fiscal year, including that
approximately a quarter of your
total revenues came from "two significant customers," and your
statement on page 45 that
approximately 35% of your accounts receivable came from one customer.
We also note
your statement that the loss of any of these customers could have a
material adverse effect
on your results of operations, cash flows, and financial position. To
the extent you are
substantially dependent on any agreements or arrangements with these
customers, please
describe the material terms of such agreements and arrangements and
file the agreements
as exhibits to your registration statement. Refer to Item 601(b)(10)
of Regulation S-K. If
you believe you are not substantially dependent on these agreements,
please provide us an
analysis to explain your basis.
23. Please revise to expand your discussion of your SURAs, SUAs and your
WaterBridge
agreement to provide investors with some additional context regarding
the material
economic terms of the agreements. We also note your disclosures in the
prospectus that
your contracts generally include inflation escalators. Please revise
your disclosures as
appropriate to provide additional information regarding the amount of
such escalators.
Regulation of Environmental and Occupational Safety and Health Matters, page
132
24. Please expand your disclosures in this section to include specific
discussions regarding
Texas and New Mexico laws and regulations, including any required
permitting processes.
Please also discuss the MBTA, which you reference on page 51.
Executive Compensation , page 145
25. We note your disclosures regarding executive compensation and the
Shared Services
Agreement, including the $5 million fee paid thereunder as direct cost
reimbursements in
2022. Please revise your disclosures to expand on your description of
the material terms of
the Shared Services Agreement, including the payment for services
provided by your
executive management team, and a discussion of the mark-up paid for
services. Please
also file the agreement as an exhibit.
Description of Shares, page 163
26. Please revise to add a discussion regarding distribution rights.
Transfer of common shares, page 165
27. We refer to your statement that you may, at your discretion, treat the
nominee holder of a
common share as the absolute owner, which would limit the beneficial
holder's rights.
Please expand your disclosure to specifically discuss these
limitations.
Steven R. Jones
FirstName
LandBridgeLastNameSteven R. Jones
Co LLC
Comapany 8,
November NameLandBridge
2023 Co LLC
November
Page 7 8, 2023 Page 7
FirstName LastName
Glossary of Certain Industry Terms, page A-1
28. Please expand the glossary to include definitions for additional oil
and gas terms used in
the filing, e.g., proved reserves, developed reserves, undeveloped
reserves, development
well, extension well, probable reserves, possible reserves, unproved
reserves, high-
probability development location, and medium-probability location.
Also expand your
definition of barrels of oil equivalent (Boe) to clarify the basis for
converting your natural
gas volumes to equivalent barrels of oil, e.g. the number of cubic
feet of natural gas per
barrel of oil equivalent to comply with Instruction 3 to Item
1202(a)(2) of Regulation S-K.
Financial Statements
DBR Land LLC, page F-12
29. It appears that DBR Land LLC together with its subsidiaries was formed
on September
2021. Please update your filing to present two years of audited
financial statements as of
December 31, 2021 and December 31, 2022 and for each of the years then
ended. See
Rules 3-01 and 3-02 Regulation S-X.
2. Summary of Significant Accounting Policies
Revenue Recognition , page F-23
30. We note your disclosure that oil and gas royalties also includes
mineral lease bonus
revenues that it receives by leasing its mineral interests to
exploration and production
companies. In addition, it appears that the Company enters into
easements and enters
into leases of the Company's surface acreage which generally include,
but are not limited
to, facility and surfaces leases with typical terms of five to ten
years and generally require
fixed monthly or annual payments. We further note your disclosure on
page F-26 that the
adoption of ASC 842 had no had no impact on your consolidated balance
sheet,
consolidated statement of operations or consolidated statement of cash
flows. In order to
better understand the Company's accounting for each of its oil and gas
royalties,
resource sales and royalties, easements and other surface-related
income and surface use
royalties revenue streams, please clarify whether the Company does
have any leases that it
is accounting for under ASC 842. Your response should clarify how the
Company
considered the scoping guidance under ASC 842-10-15-1 for each of the
Company's
major revenue streams and how the Company applied the guidance in ASC
606 to each of
its major revenue streams to the extent the Company does have any
arrangements that
contain leases and are being accounted for under ASC 842.
31. We note your disclosures that for your Oil and Gas royalties revenue
stream that you
accrue oil and gas royalties produced but not yet paid based on
historical or estimated
royalty interest production and current market prices, net of
estimated location and
contract pricing differentials and that the difference between
estimated and actual amounts
received for oil and gas royalties are recorded in the period the
payment is received. The
Company also appears to apply similar accounting to its resource and
surface use
Steven R. Jones
FirstName
LandBridgeLastNameSteven R. Jones
Co LLC
Comapany 8,
November NameLandBridge
2023 Co LLC
November
Page 8 8, 2023 Page 8
FirstName LastName
royalty agreements. Please clarify whether the Company has concluded
that its
consideration is considered variable as set forth in ASC 606-10-32-5
through 32-9 and
whether your estimate of variable consideration is typically
constrained and how it applied
or considered the guidance in ASC 606-10-32-11 through 32-13. Please
also provide the
required disclosures in ASC 606-10-50-12(b) and 606-10-50-20.
32. Notwithstanding our comment above regarding the Company's
consideration of ASC 842
in its accounting for its major revenue streams, it appears that the
Company has concluded
that revenue related to its easements is recognized upon the execution
of the agreement at
the effective date as the performance obligation has been satisfied
and the customer has
right of use. Please clarify whether the Company has concluded that
revenue should be
recognized at a point in time in accordance with ASC 606-10-25-30. To
the extent that the
Company has concluded that point in time recognition is appropriate,
please tell us how
the Company determined that revenues from easements should be
recognized at a point in
time rather than over time in accordance with ASC 606-10-25-27 given
that right to use
the land and surface is typically for a period of 5 to 10 years based
on your disclosure on
page 8 for which the customer has ability to access such land and
surface area for such
duration of time.
Notes to Consolidated Financial Statements
14. Supplemental Oil and Gas Information (Unaudited), page F-36
33. We note the various cost, revenue and cash flow tables presented under
this section do not
include the dollar clarification (in thousands). We note the same in
the revenues/income
table on page F-9. Please revise as necessary.
34. We note your disclosure that proved reserves, as of December 31, 2022,
were prepared by
a third-party independent petroleum engineer. Please obtain and file a
copy of the
engineering reserve report for each period that proved reserves are
disclosed. Refer to
disclosure requirements in Item 1202(a)(8) of Regulation S-K and the
requirement to
obtain and file the consent of the third-party engineer that prepared
the report to comply
with Item (601)(b)(23) of Regulation S-K.
Analysis of Changes in Proved Reserves, page F-37
35. Please expand the tabular presentation of proved developed and proved
undeveloped
reserves by individual product type presented on page F-37 to
additionally provide the net
quantities at the beginning of the initial period shown in the
reserves reconciliation, e.g.
December 31, 2021. Refer to FASB ASC 932-235-50-4.
36. We note the explanation in footnote (2) indicates that all of the new
reserves added from
extensions and discoveries during fiscal 2022 were the result of
conversions of unproved
reserves to proved developed reserves due to additional drilling
activity. Please expand
your disclosure to clarify and separately quantify, if true, that
these new reserves also
included reserves relating to the addition of new proved undeveloped
locations. Refer to
Steven R. Jones
LandBridge Co LLC
November 8, 2023
Page 9
FASB ASC 932-235-50-5.
General
37. Please provide us with supplemental copies of all written communications,
as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your
behalf, have presented or expect to present to potential investors in
reliance on Section
5(d) of the Securities Act, whether or not you retained, or intend to
retain, copies of those
communications.
38. We note your disclosures that you have identified and are pursuing
opportunities with
crypto currency mining and data centers. Please revise to further explain
these plans.
Please contact Ameen Hamady at 202-551-3891 or Shannon Menjivar at
202-551-3856 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Catherine De Lorenzo at 202-551-3772 or Dorrie Yale at 202-551-8776
with any other
questions.
Sincerely,
FirstName LastNameSteven R. Jones
Division of
Corporation Finance
Comapany NameLandBridge Co LLC
Office of Real
Estate & Construction
November 8, 2023 Page 9
cc: David Oelman, Esq.
FirstName LastName