Texas Pacific Land Corporation Q3 FY2025 earnings call

• Record third quarter revenue over $200 million despite weak oil and gas prices. - Oil and gas royalties production driven by robust activity in subregions, longer lateral lengths. - Water Services and Operations rebounded, with strong water sales and produced water royalty revenues. - Acquired Permian oil and gas royalties and surface acreage, funded by cash. - Closed inaugural credit facility of $500 million, undrawn. - Board approved 3-for-1 stock split. - Desalination project construction ongoing, regulatory progress on permits.

Oil and gas royalty production achieved a record of approximately 36,300 barrels of oil equivalent per day, a 9% sequential increase and 28% year-over-year increase. Record water sales of $45 million, representing 74% sequential growth and 23% growth year-over-year. Record produced water royalty revenues of $32 million, 5% sequential growth and 16% increase year-over-year. Minerals and royalties acquisitions in the third quarter were responsible for 18% of TPL's consolidated royalty production, generating a mid-teens pretax cash flow yield. Legacy NPRIs had double-digit year-over-year growth.

• Credit facility enhances liquidity and flexibility for growth opportunities. - Expect desalination facility commissioning by end of 2025. - Believes in long-term value of Permian assets despite short-term commodity price volatility. - Sees favorable long-term oil market dynamics due to Permian growth and global demand.

• Commodity price volatility impacting short-term revenues. - Regulatory risks related to desalination and water disposal permits.

Q: Congrats on a strong performance. What's a good run rate for the business? And how much of your water sales are recycled barrels versus water firm source?

A: Robert Crain discussed minimizing volatility through diverse acreage, moving target on recycled vs source water due to factors like produced water availability and frac demand.

Q: Color on the royalty acquisition announced? How many incremental net locations?

A: Chris Steddum mentioned the asset is high-quality, complements legacy base, growth dependent on activity and prices but sees strong returns.

Q: Outlook for water resources business? Run rate and recycled vs source water?

A: Robert Crain talked about minimizing volatility via diverse acreage, recycled water a moving target based on produced and demand.

Q: Progress on desalination beyond Phase II and NGL permit?

A: Robert Crain spoke about desalination technology, waste heat capture, and NGL permit in draft phase.

Q: M&A landscape in Permian?

A: Tyler Glover mentioned successful deals, healthy pipeline, opportunities in Delaware, Midland, and next-gen projects.