Skip to content
    TPL
    Earnings call· Sep 2025(Q3 FY25)

    Texas Pacific Land Corp TPL

    Nov 6, 2025 Source

    Executive summary

    Texas Pacific Land Corporation Q3 FY25 — Record Production and Strategic Acquisitions Amidst Commodity Headwinds

    Texas Pacific Land Corporation delivered record Q3 FY25 results in royalty production and water sales, driven by strategic acquisitions and infrastructure investments. The company successfully navigated a low commodity price environment by leveraging its strong balance sheet and new credit facility to consolidate high-quality Permian assets. Management remains focused on long-term value creation and exploiting commercial potential, particularly in water and next-gen opportunities like data centers.

    Highlights

    5

    • Oil and gas royalty production achieved a record of approximately 36,300 boe/d, a 28% increase year-over-year.

    • Record water sales of $45 million, representing 74% sequential growth and 23% year-over-year growth.

    • Consolidated total revenue reached a record $203 million, with adjusted EBITDA of $174 million and an 85% margin.

    • Acquired 17,300 net royalty acres for $474 million, expected to generate a double-digit pretax cash flow yield.

    • Closed on an inaugural $500 million credit facility, enhancing liquidity while maintaining a net cash balance sheet.

    Concerns

    3

    • Operating in an environment of weakest benchmark oil and gas prices since the COVID pandemic, with Brent around $65/barrel.

    • Oil and gas royalty revenues remain below Q3 2022 peak due entirely to lower commodity prices.

    • Water sales experienced volatility quarter-over-quarter, attributed to consolidation and diverse acreage position.

    Guidance & targets

    4
    CategoryTargetConfidence
    Desalination facility commissioning
    begin commissioning
    medium materiality
    High
    Phase 2 desalination facility updates
    provide updates
    medium materiality
    High
    Pretax cash flow yield from royalty acquisition
    double-digit
    high materiality
    High
    Common stock split completion
    completed
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Oil and Gas Royalty
    Production volumes benefited from robust activity in Northern Culberson, Northern Reeves and Central Midland subregions, driven by increased net wells turned to sales and longer lateral lengths.
    Production volume: 36,300 boe/dAcquired portfolio contribution: 18% of consolidated royalty productionAcquired portfolio cash flow yield: mid-teens pretaxLegacy NPRIs growth: double-digit year-over-year
    		—28%9%—
    Water Services and Operations
    Rebounded considerably from last quarter, with record water sales. Investments in brackish and treated water infrastructure accommodate volume intensity. Strong demand for in-basin and out-of-basin pore space for produced water royalties.
    Produced water royalty revenue: $32 millionProduced water royalty volume growth YoY: 19%
    		$45 million23%74%$142 million

    Operational metrics

    24
    Consolidated total revenue
    $203 million
    Q3 FY25

    First quarter in TPL's history over $200 million.

    Consolidated adjusted EBITDA
    $174 million
    Q3 FY25

    Adjusted EBITDA margin was 85%.

    Adjusted EBITDA margin
    85%
    Q3 FY25

    Consolidated adjusted EBITDA was $174 million.

    Net permitted wells
    6.1
    Q3 FY25

    as of quarter end

    Net drilled but uncompleted wells (DUC)
    9.9
    Q3 FY25

    as of quarter end

    Net completed but not producing wells
    3.1
    Q3 FY25

    as of quarter end

    Cash and cash equivalents
    $532 million
    Q3 FY25

    At quarter end, no debt.

    Bakken peak oil production
    1.5 million
    late 2019

    According to the EIA.

    Bakken current oil production
    1.2 million
    today

    According to the EIA.

    Eagle Ford peak oil production
    1.4 million
    late 2019

    According to the EIA.

    Eagle Ford current oil production
    1.1 million
    today

    According to the EIA.

    Global crude oil supply growth (excluding NGLs and other liquids)
    4.2 million
    since beginning of 2015

    Global supply growth of crude oil, excluding NGLs and other liquids.

    Permian crude oil supply growth
    4.8 million
    since beginning of 2015

    Implies Permian made up for global crude oil declines over the last decade while also providing all of the incremental growth.

    Royalty production increase
    55%
    since Q3 2022

    Attributable to lower commodity prices, not production.

    Average lateral lengths (YTD 2025 vs 2024)
    7% longer
    YTD 2025 vs 2024

    Average lateral lengths year-to-date in 2025 are approximately 7% longer than last year.

    Average lateral lengths (YTD 2025 vs 2019)
    23% longer
    YTD 2025 vs 2019

    compared to laterals spud in 2019.

    Water segment earnings
    $142 million
    last 12 months

    Water segment has generated $142 million of earnings in the last 12 months.

    Water segment investment
    nearly $200 million
    since 2017

    Invested nearly $200 million to build out source water and recycling infrastructure.

    Water segment acquired surface acreage and pore space
    approximately $220 million
    since 2017

    Acquired approximately $220 million of surface acreage in pore space. Substantially funded by approximately $150 million of 1031 and 33 exchanges and land sales.

    Water segment total earnings
    over $600 million
    since 2017

    Water segment has generated over $600 million of earnings since inception.

    Credit facility lender commitments
    $500 million
    last month

    TPL closed on its inaugural credit facility with $500 million of lender commitments. The facility was undrawn at close and remains undrawn today.

    Desalination facility capacity
    10,000
    current project

    Construction continues on our 10,000 barrel per day facility in Orla, Texas.

    Desalination CapEx estimates
    unchangedfrom last update
    current

    Our previous CapEx estimates remain unchanged from our last update.

    Incremental net wells (line of sight inventory)
    approximately 2
    future

    We expect our recent royalty acquisition to add approximately 2 net wells to our line of sight inventory.

    Industry KPIs

    4
    MetricValueDetails
    D c efficiency rig activity7% longer%
    Realized price differential$60 per barrel (oil), $2 per 1,000 cubic feet (natural gas)USD
    Basin level production volume36,300boe/d
    FCF shareholder distributions$123 millionUSD

    Deals & partnerships

    3
    unnamedAcquisition of approximately 17,300 net royalty acres, standardized to 1/8th, primarily in the Midland Basin.$474 million

    Located primarily in Martin, Howard and Midland counties. Approximately 70% of the acquired interests are adjacent to or overlapping drilling spacing units that TPL already owns. Approximately 61% of the royalty acreage is operated by Exxon, Diamondback and Occidental. Funded entirely by cash on balance sheet. Closed on November 3, 2025.

    unnamedAcquisition of approximately 8,100 surface acres in Martin County, Texas.

    The surface acquisition is adjacent to land TPL already owns, providing TPL an even larger contiguous block in a strategic area that is prospective for source and produced water, SLEM and other next-gen commercial opportunities. Closed in September 2025.

    lender commitmentsInaugural credit facility with $500 million of lender commitments.$500 million

    The credit facility was oversubscribed and contains favorable terms. Closed last month (October 2025).

    Capital programs

    1
    Orla, Texas Desalination Facilityunderway

    Benefit: 10,000 bbl/d

    Construction continues on our 10,000 barrel per day facility in Orla, Texas. We expect to begin commissioning the facility by the end of the year. Our previous CapEx estimates remain unchanged from our last update.

    Risks & headwinds

    3
    Weak benchmark oil and gas pricescurrent cycle

    Brent prompt month around $65/barrel, well below average historical $78/barrel since 2010.

    Mitigation: Leveraging strong balance sheet and credit facility to consolidate high-quality Permian assets at depressed valuations; TPL's royalty production growth provides immense upside leverage to next oil and gas price up-cycle.

    Uncertain macroeconomic conditionspast year

    Global liquids demand continues to grow at a steady pace despite uncertain macroeconomic conditions over the past year.

    Mitigation: Focus on long-term value creation, arbitrage depressed valuations for long duration assets impacted by short-term volatility.

    Volatility in water salesquarter-over-quarter

    Water sales experienced volatility quarter-over-quarter.

    Mitigation: Working to minimize volatility through consolidation and diverse acreage position; expanding off legacy acreage to capture diversity.

    What to watch in Q4 FY25

    5

    Orla desalination facility commissioning

    by the end of the year (2025)
    CurrentConstruction continues
    TargetBegin commissioning

    Why it matters

    Successful commissioning is a key milestone for TPL's proprietary freeze desalination technology and its potential for sustainable produced water solutions.

    Construction continues on our 10,000 barrel per day facility in Orla, Texas. We expect to begin commissioning the facility by the end of the year.

    Q&A highlights

    5

    What drives water sales volatility and what's a good run rate? What's the mix of recycled vs. source water?

    Volatility is attributed to consolidation and diverse acreage. The goal is to minimize it by expanding off legacy acreage. The mix of recycled vs. source water is a moving target, aiming to maximize recycled but balancing with availability and frac demand.

    “When you look at -- Derrick, it's Robert. When you look at the change of quarter-over-quarter, it's something that we're always trying to work to minimize that volatility and you can really attribute it to -- mainly to consolidation and diverse acreage position that you see.”

    asked by Derrick Whitfield · answered by Robert Crain

    2 min read6 chapters

    Detailed Narrative

    01

    Record Performance & Strategic Growth

    TPL achieved a record quarter with over $200 million in revenue, driven by strong performance in oil and gas royalties and water services. Royalty production reached 36,300 boe/d, a 28% YoY increase, while water sales hit $45 million, up 23% YoY. This growth was supported by both organic investments and inorganic acquisitions, including a significant royalty acquisition and surface acreage purchase in the Permian.

    02

    Permian Asset Consolidation Strategy

    Despite lower commodity prices (Brent around $65/barrel), TPL views the current cycle as an attractive opportunity to consolidate high-quality Permian assets. The company believes longer-term mid-cycle oil prices will be higher and is leveraging its strong balance sheet and new $500 million credit facility to acquire long-duration assets impacted by short-term volatility.

    03

    Oil & Gas Royalty Dynamics

    Royalty production benefited from robust activity in Northern Culberson, Northern Reeves, and Central Midland subregions, with increased net wells turned to sales and longer lateral lengths (7% longer year-to-date 2025 vs. last year). The acquired minerals and royalties portfolio, started in 2018, now contributes 18% of consolidated royalty production and generates a mid-teens pretax cash flow yield.

    04

    Water Services & Infrastructure

    The Water Services and Operations segment rebounded considerably, with record water sales. TPL's investments in brackish and treated water infrastructure position it as a key provider in the Permian, capable of accommodating high-volume demands from co-completions and simul/trimul fracking. Produced water royalty revenues and volumes were up 16% and 19% YoY, respectively, driven by strong demand for in-basin and out-of-basin pore space.

    05

    Desalination Project Progress

    Construction of the 10,000 bbl/d freeze desalination facility in Orla, Texas, is progressing, with commissioning expected by year-end. TPL received an additional land application pilot permit for beneficial reuse of treated freshwater to irrigate land and restore native bush grass. The company is working towards a TCEQ discharge permit and plans to evaluate the system's capabilities at scale and explore waste heat capture and process efficiencies.

    06

    Macro Oil Market Perspective

    Management highlighted that excluding the Permian, total U.S. oil production appears to have peaked 5 years ago and is down about 1 million bbl/d from that peak. The Permian has been responsible for virtually all global crude oil supply growth over the last decade, making up for declines in other regions. With structural liquids demand growing and key supply regions declining, TPL anticipates a favorable skew towards higher oil price cycles long-term.

    AI-generated summary of the company’s earnings call. Not investment advice.