Business Breakdowns WaterBridge: Oil and Water - [Business Breakdowns, EP.228]
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Sep 24, 2025 James Davalos, an investment professional at Horizon Kinetics, dives into the fascinating world of Waterbridge and Landbridge, two key players in oil and water infrastructure. He discusses the critical role of Waterbridge as a leading produced-water disposal operator in Texas, the unique challenges of water disposal from shale operations, and the importance of land value in this sector. With insights on contract structures, the economics of water management, and next-gen opportunities in West Texas, Davalos paints a compelling picture of this often overlooked industry.
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How Horizon Kinetics Entered The Space
- Horizon Kinetics' interest began with Texas Pacific Land Corporation, a liquidating land trust discovered in 1995 by Murray Stahl.
- That early thesis on land optionality led HK to follow related land and water infrastructure opportunities.
Infrastructure Components And Bottlenecks
- Waterbridge's core PP&E consists of land (or easements), large-diameter pipelines, and saltwater disposal (SWD) wells with downhole monitoring.
- The main bottleneck for growth is access to land/pore space and easements in high-value zones.
Water Cuts Create Durable Demand
- Water volumes decline far more slowly than oil because water cuts rise as wells age, creating long-lived disposal demand.
- Even with flat oil production, produced water volumes should grow mid- to high-single digits over time.