How deep is the interest from hyperscalers/AI labs in using produced water for chip cooling, given its water additive to the hydrologic cycle benefit?

Interest in produced water for data center use, including chip cooling and building cooling, is significant. TPL's freeze technology is particularly well-suited for direct chip cooling due to its high heat transfer capabilities, aligning with water positivity/neutrality goals for data centers. “I mean the interest in produced water and data center use is huge. And I think it's not just one stream. When you look at it, just -- let's start with just the consumptive piece.”

Should investors expect more sizable land acquisitions, and how much of the data center opportunity can TPL leverage from its existing footprint versus needing to buy more land?

TPL's primary goal is to develop its existing resources, but it is simultaneously seeking other opportunities, similar to its water business expansion. The company is in advanced conversations for 25 gigawatts of projects and expects to announce definitive agreements soon, justifying looking beyond its current footprint. “we're in advanced conversations with multiple hyperscalers, AI labs and power generators on 25 gigawatts of projects right now. I would be disappointed if we don't announce at least one or more major definitive agreements in the near term.”

Given record produced water royalty volumes and high revenue per barrel ($0.08+), should this trend continue to ramp over the next 1-2 years?

Existing contracts include price escalators, and pore space is expected to become more valuable over time. While transportation royalties are typically lower than injection royalties, the overall trend for royalty revenue per barrel should remain steady to increasing. “Well, we've got price escalators built in our existing contracts. And I think pore space will become more valuable over time.”

TPL

Texas Pacific Land (TPL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Aug 6, 2026

Source: earnings call transcript

Executive summary

Texas Pacific Land Corporation Q2 FY26 — Record Revenue, Net Income, and Free Cash Flow Driven by Royalty Production and Data Center Expansion

Texas Pacific Land Corporation achieved record financial results in Q2 FY26, driven by strong oil and gas and produced water royalty volumes. The company is actively expanding its strategic data center and power generation efforts beyond its traditional Permian footprint, including a significant land acquisition and progress on desalination for chip cooling. Management is focused on capital allocation towards high-return opportunities, including these new growth initiatives.

Highlights

Record quarterly total revenue of approximately $246 million, representing a 31% year-over-year increase.
Record quarterly free cash flow of $156 million, up 20% year-over-year.
Oil and gas royalty production averaged 39,700 boe/d, an increase of 20% year-over-year.
SLEM revenues grew 37% sequentially to $24 million, driven by strong easement performance.
Strategic acquisition of over 10,000 acres for $100 million to expand data center and power generation efforts.

Concerns

Water sales volumes declined 19% sequentially to 663,000 bbl/d, impacted by weak in-basin natural gas prices.

Guidance & targets

Category	Target	Timeline	Confidence
Capital expenditures	$65 million to $75 million medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Oil and Gas Royalty Record production, benefiting from strong oil prices due to unhedged position. Production: 39,700 boe/d	—	20%	7%	—
Produced Water Royalty Driven by strong demand for TPL's in-basin and out-of-basin pore space. Volumes: 4.9 million bbl/d	—	15%	6%	—
Water Sales Impacted by weak in-basin natural gas prices, shifting development away from Delaware Basin. Expect improvement with new gas pipeline capacity. Volumes: 663,000 bbl/d	—	38%	-19%	—
SLEM Driven by strong performance for pipeline and wellbore easements.	$24 million	—	37%	—

TPL operating KPIs by quarter

TPL operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Jun 2025 Q2 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Production Royalty	~29.1K boe/d Fourth quarter 2024 royalty production of approximately 29,100 barrels of oil equivalent per day represents an 11% increase compared to the same period last year and a 3% increase sequentially as activity remains robust in our Loving County, Central Midland Basin and Northern Reeves County subregions. Source: earnings call transcript	~31.1K boe/d Oil and gas royalty production averaged approximately 31,100 barrels of oil equivalent per day, representing 7% growth sequential quarter-over-quarter and 25% growth year-over-year. Source: earnings call transcript	33.2K boe/d Oil and gas royalty production of 33,200 barrels of oil equivalent per day also represents a company record. Source: earnings call transcript	~36.3K boe/d Oil and gas royalty production achieved a record of approximately 36,300 barrels of oil equivalent per day representing 9% sequential increase and a 28% increase year-over-year. Source: earnings call transcript	—	~37.1K boe/d Oil and gas royalty production averaged approximately 37,100 barrels of oil equivalent per day, roughly flat sequentially, and up roughly 19% year-over-year. Source: earnings call transcript	~39.7K boe/d Oil and gas royalty production averaged approximately 39,700 barrels of oil equivalent per day, up 7% sequentially and 20% year-over-year. Source: earnings call transcript	—
Produced water royalty volumes	~4M bbl/d Quarterly produced water royalty volumes grew 8% sequentially and 44% year-over-year to approximately 4 million barrels per day, benefiting from our new volumes into our out-of-basin pore space in Andrews County that we acquired in 2023. Source: earnings call transcript	—	—	—	—	—	4.9M bbl/d Produced water royalty volumes were 4.9 million barrels per day during the quarter, which represents growth of 6% sequentially and 15% year-over-year, driven by strong demand for TPL's in-basin and out-of-basin pore space. Source: earnings call transcript	—
Net permitted wells	6.4 As of quarter end, we had 6.4 net permitted wells, 13.2 net DUCs and 3.0 net completed but not producing wells. Source: earnings call transcript	—	6 As of quarter end, TPL had 6 net permitted wells, 11.1 net drilled but uncompleted wells and 5.1 net completed but not producing wells. Source: earnings call transcript	6.1 As of quarter end, TPL had 6.1 net permitted wells, 9.9 net drilled but uncompleted wells and 3.1 net completed but not producing wells. Source: earnings call transcript	5.6 As of quarter end, TPL had 5.6 net permitted wells, 9.8 net drilled but uncompleted wells, are commonly referred to as DUCs, and 4.0 net completed but not producing wells. Source: earnings call transcript	5.8 As of quarter end, TPL had 5.8 net permitted wells, 9.6 net drilled but uncompleted wells or commonly referred to as DUCs, and 5.2 net completed but not producing wells. Source: earnings call transcript	5.6 As of quarter end, TPL had 5.6 net permitted wells, 9.5 net drilled but uncompleted wells or commonly referred to as DUCs and 3.4 net completed but not producing wells. Source: earnings call transcript	-3.4%
Net DUCs	13.2 As of quarter end, we had 6.4 net permitted wells, 13.2 net DUCs and 3.0 net completed but not producing wells. Source: earnings call transcript	12.9 As of quarter end, we had 5.9 net permanent wells, 12.9 net drilled but uncompleted wells, otherwise known as DUCs, and 5.4 net completed but not producing wells, otherwise known as CUPs. Source: earnings call transcript	11.1 As of quarter end, TPL had 6 net permitted wells, 11.1 net drilled but uncompleted wells and 5.1 net completed but not producing wells. Source: earnings call transcript	9.9 As of quarter end, TPL had 6.1 net permitted wells, 9.9 net drilled but uncompleted wells and 3.1 net completed but not producing wells. Source: earnings call transcript	9.8 As of quarter end, TPL had 5.6 net permitted wells, 9.8 net drilled but uncompleted wells, are commonly referred to as DUCs, and 4.0 net completed but not producing wells. Source: earnings call transcript	9.6 As of quarter end, TPL had 5.8 net permitted wells, 9.6 net drilled but uncompleted wells or commonly referred to as DUCs, and 5.2 net completed but not producing wells. Source: earnings call transcript	9.5 As of quarter end, TPL had 5.6 net permitted wells, 9.5 net drilled but uncompleted wells or commonly referred to as DUCs and 3.4 net completed but not producing wells. Source: earnings call transcript	-1%
Net completed but not producing wells	3 As of quarter end, we had 6.4 net permitted wells, 13.2 net DUCs and 3.0 net completed but not producing wells. Source: earnings call transcript	5.4 As of quarter end, we had 5.9 net permanent wells, 12.9 net drilled but uncompleted wells, otherwise known as DUCs, and 5.4 net completed but not producing wells, otherwise known as CUPs. Source: earnings call transcript	5.1 As of quarter end, TPL had 6 net permitted wells, 11.1 net drilled but uncompleted wells and 5.1 net completed but not producing wells. Source: earnings call transcript	3.1 As of quarter end, TPL had 6.1 net permitted wells, 9.9 net drilled but uncompleted wells and 3.1 net completed but not producing wells. Source: earnings call transcript	4 As of quarter end, TPL had 5.6 net permitted wells, 9.8 net drilled but uncompleted wells, are commonly referred to as DUCs, and 4.0 net completed but not producing wells. Source: earnings call transcript	5.2 As of quarter end, TPL had 5.8 net permitted wells, 9.6 net drilled but uncompleted wells or commonly referred to as DUCs, and 5.2 net completed but not producing wells. Source: earnings call transcript	3.4 As of quarter end, TPL had 5.6 net permitted wells, 9.5 net drilled but uncompleted wells or commonly referred to as DUCs and 3.4 net completed but not producing wells. Source: earnings call transcript	-34.6%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Chevron Land sale and water supply agreement for a large-scale power generation facility to support a customer data center.

Multi-gigawatt power and data center development (Project Kilby) in Reeves County, Texas, supporting a customer data center. Validates Permian as a data center infrastructure hub.

null Acquisition of over 10,000 acres of land in Shackelford and Jones County, Texas, for data center and power generation efforts. $100 million

Land acquired in a fast-growing data center region, attractive due to contiguousness, land/water resources, access to natural gas and grid infrastructure, fiber, and proximity to a midsized city.

Bolt Data & Energy Joint effort to progress projects with various high-quality hyperscalers and AI labs.

Working on developing projects, including one in the Shackelford, Jones County area, with advanced diligence and community engagement.

Capital programs

Orla Phase 2b Desalination Facility commissioning

Benefit:10,000 barrel a day capacity

Completed construction and commenced commissioning. Will demonstrate produced water desalination at scale. Grand opening and ribbon cutting scheduled for Monday.

Risks & headwinds

Weak in-basin natural gas prices Q2 FY26

Impacted water sales volumes, causing a 19% sequential decline to 663,000 bbl/d.

Mitigation:Expect improvement as substantial new gas pipeline capacity enters service over the next few quarters, leading to mix shift towards the Delaware Basin.

What to watch in Q3 FY26

Data Center Definitive Agreements

Near term

Current Advanced conversations on 25 gigawatts of projects

Target One or more major definitive agreements announced

Why it matters

Signals concrete progress and monetization of the new data center strategy, impacting future revenue streams.

we're in advanced conversations with multiple hyperscalers, AI labs and power generators on 25 gigawatts of projects right now. I would be disappointed if we don't announce at least one or more major definitive agreements in the near term.

Find out whether TPL delivers this. Inve re-checks your case every morning.

Q&A highlights

How does TPL frame the opportunity and potential revenue streams from the new land acquisition outside the Permian?

TPL views the power and compute opportunity in West Texas as enormous and broader than just the Permian. The acquisition adds flexibility to TPL's value proposition, and the company aims to capture value across the entire project lifecycle (land use, water, aggregates) while remaining capital-light, similar to its oil and gas business model.

“I mean it is a little bit of a step out, but I mean, we think the power and compute opportunity in West Texas is enormous and broader than just the Permian and our legacy footprint.”

asked by Derrick Whitfield · answered by Tyler Glover

2 min read 5 chapters

Detailed narrative

Record Financial Performance

TPL reported record quarterly total revenue of approximately $246 million, marking a 31% year-over-year increase, alongside record net income and free cash flow of $156 million, up 20% year-over-year. This strong performance was underpinned by record oil and gas royalty production of 39,700 boe/d, which grew 20% year-over-year, and produced water royalty volumes of 4.9 million bbl/d, up 15% year-over-year.

The company's unhedged royalty position allowed it to fully benefit from the strong oil price environment.

Strategic Data Center Expansion

The company disclosed a previously announced land sale and water supply agreement related to Project Kilby, a multi-gigawatt power generation facility by Chevron supporting a customer data center in Reeves County, Texas. This validates the Permian as a data center infrastructure hub.

Additionally, TPL acquired over 10,000 acres in Shackelford and Jones County, Texas, for approximately $100 million. This acquisition expands its strategic data center and power generation efforts beyond the immediate Permian Basin, targeting a fast-growing data center region with favorable resources and infrastructure.

Produced Water Desalination Progress

TPL has completed construction and commenced commissioning of its Phase 2b desalination facility in Orla, Texas, aiming to ramp up to a 10,000 bbl/d capacity. This facility utilizes patented freeze desalination technology, with equipment exclusivity for oil and gas applications.

The company plans to implement colocation studies for chip cooling, investigate waste heat recovery, and explore monetization of high-spec freshwater and concentrated brine output streams, including potential lithium extraction. Energy supermajors, hyperscalers, and AI labs have shown strong interest in these commercial and operational opportunities.

Water Sales Volume Impact and Outlook

Water sales volumes experienced a 19% sequential decline to 663,000 bbl/d in the second quarter. This was primarily attributed to weak in-basin natural gas prices, which led operators to shift some development away from the Delaware Basin. However, management anticipates an improvement in this trend as substantial new gas pipeline capacity is expected to enter service over the next few quarters, which should improve local in-basin gas price differentials and encourage a mix shift back towards the Delaware.

SLEM Revenue Growth and Hyperscaler Engagement

Surface Lease and Easement (SLEM) revenues increased 37% sequentially to $24 million, driven by robust performance in pipeline and wellbore easements. TPL is also actively engaged in advanced conversations with multiple hyperscalers, AI labs, and power generators regarding 25 gigawatts of projects.

The company expects to announce one or more major definitive agreements in the near term, aiming to capture value across the entire project lifecycle, including land use, water, and aggregates.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.