Texas Pacific Land Corp Q2 FY2025 earnings call

• Ty Glover highlighted record performance across major revenue streams despite oil price volatility, with oil and gas royalty production at a record 33,200 barrels of oil equivalent per day. He discussed the Permian's resource potential, noting over 60,000 undeveloped locations with breakevens below $60 oil and $3 gas, and the impact of technology improvements on resource recovery.
• Chris Steddum reported consolidated revenue, adjusted EBITDA, and free cash flow figures, noting royalty production growth, record SLEM and produced water royalty revenues, and discussed water sales trends affected by lower oil prices but expected to improve with operator activity resuming.
• Mentioned progress on the Phase 2b desalination facility, which is expected to be the largest in the Permian, with equipment received and installation underway, and permits applied for.

Consolidated total revenue for the second quarter of 2025 was $188 million, with consolidated adjusted EBITDA at $166 million and an 89% adjusted EBITDA margin. Free cash flow was $130 million, a 12% year-over-year increase. Royalty production was approximately 33,200 barrels of oil equivalent per day, a 33% year-over-year increase and 7% sequential quarter-over-quarter increase. SLEM revenues were $36 million (a company record), driven by $20 million in pipeline easements. Produced water royalty revenues were $31 million (a company record). Water sales were $26 million, down $13 million sequentially due to lower activity from lower oil prices, but operators are bringing back activity with wells deferred during the quarter expected to be back in completion schedules for the second half of the year. Revenue contribution: Royalty production, SLEM, and produced water royalties all contributed significantly, with SLEM and produced water royalties setting records.

TPL is ready to deploy capital opportunistically whether through substantial buybacks, organic investment, or asset acquisitions should the current down cycle persist. Management remains confident in the Permian's long-term potential despite near-term commodity price vacillations.

No specific risks detailed, but general mention of commodity price volatility and industry activity slowdowns as factors that could impact performance.

Q: Thoughts on Water Resources outlook for the second half, given weaker water sales in Q2?

A: Robert Crain noted Q2 water sales weakness was due to commodity price-driven activity reduction and spatial variation in completion activities, but expects Q3 to be strong and Q4 dependent on commodity prices. Also mentioned consolidation in water midstream supports TPL's Delaware water thesis.

Q: Thoughts on Aris acquisition by Western and its relation to TPL's water value?

A: Robert Crain agreed it supports TPL's Delaware water thesis and sees consolidation in water midstream as creating more opportunity for land and pore space owners.

Q: Cost objectives for the 10,000 barrel per day desal facility and its importance for power gen and data center opportunities?

A: Robert Crain stated the desal facility is part of TPL's effort to address produced water challenges, is at scale, and is important for the industry. It ties in with data center cooling and cogen power opportunities, with synergies like waste heat capture being explored.

Q: Expectations for additional power generation announcements in the Permian?

A: Robert Crain noted power generation in the Permian makes sense due to available ingredients like produced water, and expects more announcements as talks accelerate, citing Coterra's announcement as the first of many.