Texas Pacific Land Q1 FY26 earnings call TPL

Texas Pacific Land Corporation achieved record quarterly total revenue of approximately $237 million, net income, and free cash flow of $136 million in Q1 2026. This performance was primarily driven by strong oil and gas royalty production, which averaged 37,100 barrels of oil equivalent per day, representing a 19% increase year-over-year. The company's unhedged commodity position allowed it to fully capture the upside from elevated oil prices, contributing to a 12% sequential and 21% year-over-year increase in consolidated revenues.

Despite crude oil prices spiking dramatically, TPL observed only a marginal uptick in recent operator activity in the Permian Basin. Management noted industry uncertainty^🌐 regarding the duration of the oil supply shock, which has tempered a more robust producer response. However, given the persistence of the supply disruption and depleting global inventories, TPL anticipates a ramp-up in rig and frac spread activity over the coming quarters if price signals remain elevated, leveraging the Permian's immense undeveloped well locations.

TPL made tangible progress in its next-gen endeavors, entering an agreement to sell a small section of land for $43 million, structured into annual payments over 20 years, and a separate commercial agreement to supply water for the same development. The company highlighted heightened urgency among hyperscalers and AI labs to secure power and compute in Texas, with TPL's unique capabilities across surface, water, and energy positioning it to solve problems for developers. The shift towards behind-the-meter gas-fired generation makes more of TPL's acreage viable and increases water usage opportunities.

The Phase 2b 10,000 barrel per day produced water desalination facility is nearing completion, with refrigeration inspection planned for later this month and inlet water flow expected in the coming weeks. This test facility aims to evaluate the economic viability of produced water desalination at scale. It will also provide an opportunity to empirically demonstrate the commercial potential for waste heat capture, cooling co-location, and the utilization of outlet freshwater and concentrated brine streams, offering a meaningful solution for the Permian's growing produced water volumes.

As of quarter-end, TPL's line-of-sight well inventory increased by 6% sequentially to 20.7 net wells, comprising 5.8 net permitted wells, 9.6 net drilled but uncompleted wells (DUCs), and 5.2 net completed but not producing wells. Operators continue to push for longer laterals, with new permits and spuds averaging in excess of 13,000 feet. Factoring in these longer laterals, the net normalized line-of-sight inventory is up 11% sequentially, indicating strong permitting and drilling activity across TPL's Delaware and Midland positions.

TPL acknowledged the passing of Murray Stahl, whose firm, Horizon Kinetics, has been the company's largest shareholder for many decades. Management praised Murray as a tremendous long-time advocate who understood the virtues of real property and patience, and whose conviction remained unrivaled as TPL grew. The company expressed confidence that Murray's legacy will live on through his colleagues at Horizon Kinetics, with whom TPL maintains a close relationship, ensuring continued stewardship towards TPL's full potential.