Q1 2025 Texas Pacific Land Corp Earnings Call

Greetings and welcome to the Texas specific land Corporation first quarter 2025 earnings call.

Unknown Attendee: Greetings and welcome to the Texas Pacific Land Corporation first quarter 2025 earnings call. At this time, all participants are in a listen-only mode.

At this time all participants are in a listen only mode. A brief question answer session will follow the formal presentation.

Unknown Attendee: A brief question-answer session will follow the formal presentation.

If anyone should require operator assistance. Please press star zero on your telephone keypad.

Unknown Attendee: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this concert is being recorded.

As a reminder, this conference is being recorded.

Shawn Amini: It is now my pleasure to introduce your host, Shawn Amini, Investor Relations. Thank you. You may begin.

Speaker Change: It is not my pleasure to introduce your host Sean Amini Investor Relations. Thank you you may begin. Thank you for joining us today for our Texas Pacific Land Corporation's first quarter 2025 earnings Conference call Yesterday afternoon. The company released its financial results and filed its Form 10-Q with the Securities and Exchange Commission.

Shawn Amini: Thank you for joining us today for Texas Pacific Land Corporation's first quarter 2025 earnings conference call. Yesterday afternoon, the company released its financial results and filed its form 10-Q with the Securities and Exchange Commission, which is available on the investor section of the company's website at www.texaspacific.com.

Saleable I mean, that's your section of the company's website at Www Dot, Texas specific dot com.

Speaker Change: As a reminder remarks made on today's conference call May include forward looking statements forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.

Shawn Amini: As a reminder, remarks made on today's conference call may include forelooking statements. Forelooking statements are subject to risk and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our recent SEC file.

Speaker Change: We do not undertake any obligation to update our forward looking statements in light of new information or future events.

Speaker Change: More detailed discussion of the factors that may affect the Companys results. Please refer to our earnings release for this quarter and so our recent SEC filings.

Shawn Amini: During this call, we'll also be discussing certain non-GAAP financial measures. More information and reconciliations about these non-GAAP financial measures are contained in our earnings relief and SEC filing.

Speaker Change: During this call will also be discussing certain non-GAAP financial measures.

Speaker Change: More information and reconciliation to these non-GAAP financial measures are contained in our earnings release and SEC filings.

Shawn Amini: Please also note, we may at times refer to our company by stock ticker TPL.

Speaker Change: Also note we may at times, if our drug company bites toxic or T T L.

Unknown Attendee: This morning's conference call is hosted by TPL's Chief Executive Officer, Ty Glover, and TPL's Chief Financial Officer, Chris Steddum.

Pat Glover: This mornings conference call is hosted by T. P S Chief Executive Officer, Pat Glover, and People's Chief Financial Officer, Krista and thanks.

Unknown Attendee: And Executive Vice President of Texas Pacific Water Resources, Robert Crain. Management will make some prepared comments after which we'll open the call for questions.

Speaker Change: Negative Vice President of Texas Pacific Water resources, Robert Crane.

Speaker Change: Management will make some prepared comments after which we'll open the call for questions now I will turn the call over to Tom.

Tyler Glover: Now I will turn the call over to Tyler. Good morning, everyone, and thank you for joining us today. TPL's first quarter 2025 marked a strong start to the year with quarterly records set in both oil and gas royalty production and water segment revenues. 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. This performance was driven by strong development activity in our Northern Culberson, Northern Reeves, and Central Midland subregions led by operators including Chevron, BP, Devon, and Cotera. Water segment revenues totaled $69 million, representing 3% sequential quarter over quarter growth and 11% growth year over year as our commercial efforts continue to yield robust volume gains in both water sales and produced water royalties.

Tom: Good morning, everyone and thank you for joining us today.

Tom: P. P. L first quarter 'twenty twenty-five marked a strong start to the year with quarterly records set in both oil and gas royalty production and water segment revenues.

Tom: Oil and gas royalty production averaged approximately 31100 barrels of oil equivalent per day, representing 7% growth sequential quarter over quarter, and 25% growth year over year.

Tom: This performance was driven by strong development activity in our northern Culberson, Northern Reeves and central Midland sub regions led by operators, including Chevron BP, Devon and good Scott.

Tom: Water segment revenues totaled $69 million, representing 3% sequential quarter over quarter growth and 11% growth year over year as our commercial efforts continue to yield robust volume gains in both water sales and produce water royalties.

Tom: Given the evolving macroeconomic landscape and volatility in commodity markets. My prepared remarks today will focus on what we're seeing and hearing from our operator customers.

Tyler Glover: Given the evolving macroeconomic landscape and volatility in commodity markets, my prepared remarks today will focus on what we're seeing and hearing from our operator customers, the natural business hedges, and the built-in growth TPL retains to withstand a potential oil price downturn. Beginning with our outlook on near-term activity. We have not yet seen a widespread downturn in activity as oil prices have weakened this year, although a few operators have recently announced intentions to drop rigs and frack spreads. feedback from other operators as they are cautiously evaluating activity. Oil were to stay below $60 for a sustained period of time.

Tom: Natural business hedges and then built in growth T. P. L retains to withstand a potential oil price downturn.

Tom: Beginning with our outlook on near term activity.

Tom: We have not yet seen a widespread downturn in activity as oil prices have weakened this year, although a few operators have recently announced intention to drop rigs and frac spreads.

Tom: Feedback from other operators as they are cautiously evaluating activity plans.

Tom: All were to stay below $60 for sustained period of time.

Tyler Glover: then we would expect more meaningful activity declines to emerge in the back half of the year. Specific to TPO, our royalty acreage is predominantly operated by supermajors and large independents whose development plans, while not completely impervious to price declines, tend to exhibit more inertia than those of mid-cap independents and privates. We would expect overall Permian activity and production declines to be slower relative to other U.S. oil basins, and we believe TPL's net production will continue to outperform the basin overall, given our near-term well inventory and the broad resilience of our operators' activity plan. Our near-term well inventory remains robust with net-permitted wells, net-drilled-but-uncompleted wells, and net-completed-but-not-producing wells at levels above our historical averages.

Tom: And we would expect more meaningful activity declines to emerge in the back half of the year.

Tom: Specific to T. P. L. A royalty acreage is predominantly operated by Super majors, and large independents, whose development plans.

Tom: Not completely impervious to price declines.

Tom: Tend to exhibit more and nurture the notes with mid cap independents in front of it.

Tom: We would expect the overall Permian activity and production declines to be slower relative to other U S oil basins and we believe Ppl's net production will continue to outperform the base and overall, given our near term well inventory and the broad resilience of our operator's activity plans.

Tom: Our near term well inventory remains robust with net permitted wells net drilled but uncompleted wells and that completed but not producing wells at levels above our historical averages.

Tyler Glover: The total of these well categories represents the highest TPL is ever recorded. Of this specific set of wells, a total of approximately 18 net wells comes from an operator group consisting of Exxon, Chevron, Conoco, BP, Occidental, EOG, and Katerra.

Tom: Total of these well categories represents the highest T. P. L has ever recorded.

Tom: Extended wells a total of approximately 18 net wells comes from an operator group consisting of Exxon Chevron Conoco V P Occidental EOG Tara.

Tom: Yeah.

Tom: Turning to the impact of commodity prices affecting P. P L. Various revenue streams.

Tyler Glover: Turning to the impact of commodity prices affecting TPL's various revenue streams. Although our oil and gas royalties are directly exposed to commodity prices, it's important to note that we are not burdened by well capital expenditures or operating expenses. As a result, this revenue stream generates positive free cash flow even in severely depressed pricing environments. For water sales, while there is indirect sensitivity to operator drilling plans, since completion activity reduces demand for brackish and recycled water volumes, the business retains operational and financial flexibility to reduce capital expenditures and variable costs. For produced water royalties, the revenues are fixed fee based, thus mitigating the direct impact of lower commodity prices.

Tom: Okay.

Tom: Although our oil and gas royalties are directly exposed to commodity prices. It's important to note we are not burdened by well capital expenditures or operating expenses ASIC.

Tom: As a result of this revenue stream generates positive free cash flow, even if severely depressed pricing environment.

Tom: For water sales, while there is indirect sensitivity to operator drilling plans as completion activity reduces demand for brackish and recycled water volumes the business retains the operational and financial flexibility to reduce capital expenditures and variable costs.

Speaker Change: Well it produced water royalties the revenues are fixed fee base, that's mitigating the direct impact of lower commodity prices.

Tyler Glover: Indirectly, however, volumes could potentially increase during a downturn in drilling activity. We estimate that basin-wide, approximately 30-50% of water use for completion activity comes from recycled produced water. If new completion activity were to slow down, produced water that would otherwise have been recycled for fracking would instead need to be transported and injected for disposal. We saw this dynamic play out in 2020 when basin-wide drilling and completion activity declined, and our produced water volumes increased by over 30% year-over-year.

Tom: Indirectly, however volumes could potentially increase during a downturn in drilling activity.

Tom: We estimate that basin wide, approximately 30% to 50% of water use for a completion activity comes from recycled produced water.

Tom: If new completion activity were to slow down produced water that would otherwise have been recycled for fracking would instead need to be transported and injected for disposal.

Tom: Saw this dynamic play out in 2021 basin wide drilling and completion activity declined and our produced water volumes increased by over 30% year over year.

Tyler Glover: Our surface leases, easements, and material sales revenue, which we refer to by its acronym SLIM, is generally a fixed-speed-based revenue model that is largely tied to oil and gas activities such as pipelines, easements, commercial leases, wellbore easements, and caliche sales, among other items. Slim revenues will generally flex up or down with the broader Permian activity levels. Many of the easement contracts contain 10-year renewal payments that are subject to CPI escalators upon renewal. In 2016, we began implementing these renewal payment features into our easement contract. As a result, beginning next year, TPL will begin benefiting from this built-in revenue tailwind, regardless of the price of oil.

Tom: Our surface leases easements and materials sales revenue, which we referred to by its acronym Slim is generally a fixed fee based revenue model that is largely tied to oil and gas activities such as pipeline easements commercial leases wellbore easements and caliche sales among other items.

Tom: Slim revenues will generally flex up or down what the broader Permian activity levels.

Tom: Many of the easement contracts contain 10 year renewal payments, they're subject to CPI escalators upon renewal.

Tom: 2016, we began implementing these renewal payment features into our easement contrasts.

Tom: As a result, beginning next year T. P. L will begin benefiting from this built in revenue tailwind regardless of the price of oil.

Tom: Given the significant cumulative increase in CPI levels over the last decade, we anticipate that the renewal payment escalators will be approximately 35%.

Tyler Glover: Given the significant cumulative increase in CPI levels over the last decade, we anticipate that the renewal payment escalators will be approximately 35%. In 2026, we anticipate approximately $10 million in renewal payments derived from easements signed in 2016. The payment renewals will then ramp up in the three years following 2026 as we anticipate upwards of $35 million per year in renewals. In total, we estimate that the easement renewals over the next decade will exceed $200 million. And to be clear, these renewal payments will then reoccur in another 10 years with CPI escalation. This will be incremental to the cash flow generated from new ongoing SLIM activities as Permian development is likely to continue for decades.

Tom: And 'twenty 'twenty six we anticipate approximately $10 million in renewal payments derived from easement signed in 2016.

Tom: The payment renewals will then ramp up in the three years following 2026.

Tom: We anticipate upwards of $35 million per year and renewals.

Tom: In total we estimate that the easement renewals over the next decade will exceed $200 million.

Tom: And to be clear these renewal payments will then reoccur in another 10 years with CPI escalation.

Tom: This will be incremental to the cash flow generated from new ongoing slim activities as Permian development is likely to continue for decades.

Tom: In summary, while we're certainly not hoping for a protracted downturn in commodity prices P. P. L is built to withstand it.

Tyler Glover: In summary, while we're certainly not hoping for a protracted downturn in commodity prices, TPL is built to withstand it. Whereas many oil and gas upstream operators might experience negative free cash flow under a depressed commodity price environment, TPL's industry-leading margins could allow the company to still maintain positive free cash flow. In addition to our high margin, resilient catch flow streams, our balance sheet is equally strong. We continue to maintain a net cash position with zero debt and $460 million of cash and cash equivalents at March 31st.

Tom: Whereas many oil and gas upstream operators might experienced negative free cash flow under a depressed commodity price environment T. P. L to industry, leading margins can allow the company to still maintain positive free cash flow.

Tom: In addition to our high margin resilient cash flow streams, our balance sheet is equally strong.

Tom: We continue to maintain a net cash position with zero debt and $460 million of cash and cash equivalents at March 31st.

Tyler Glover: We understand that commodity businesses are inherently cyclical, and we've intentionally managed and structured our business to perform well during difficult periods. With TPL operating from arguably the strongest financial position it has ever been in, We look to take advantage of any opportunities that might materialize. That could mean adding high-quality and strategic royalties, surface and water assets, substantially ramping up buybacks, or a combination thereof. Our goal is to maximize stockholder value over the long term, and we retain the flexibility and possess the wherewithal to execute throughout commodity cycles.

Tom: We understand the commodity businesses are inherently cyclical and we've intentionally managed and structured our business to perform well during difficult periods.

Tom: With P. P L operating from arguably the strongest financial position than has ever been in.

Tom: We look to take advantage of any opportunities that might materialize.

Tom: That could mean, adding high quality and strategic royalties surface and water assets.

Essentially ramping up buybacks or a combination thereof.

Tom: Our goal is to maximize stockholder value over the long term and we retain the flexibility and because that's the wherewithal to execute throughout commodity cycles.

Chris Steddum: With that, I'll hand the call over to Chris. Thanks, Ty. For the first quarter of 2025, consolidated revenues were $196 million. Consolidated adjusted EBITDA was $169 million, with an adjusted EBITDA margin of 86.4%. Free cash flow was $127 million, representing an 11% increase year-over-year. As Ty mentioned per day, representing a 25% increase year-over-year. As of quarter end, we had 5.9 net permanent wells, 12.9 net drilled uncompleted wells, otherwise known as DUCs, and 5.4 net completed but not producing wells, otherwise known as CUCs. The sum of permitted wells, ducts, cups totals 24.3 net wells of near-term inventory.

Chris: With that I'll hand, the call over to Chris.

Chris: Thanks Todd.

Chris: For the first quarter of 'twenty 25, consolidated revenues were $196 million consolidated adjusted EBITDA was $169 million with an adjusted EBITDA margin of 86.4% free cash flow was $127 million, representing an 11% increase.

Chris: Year over year as Todd mentioned earlier royalty production. This past quarter was approximately 31100 barrels of oil equivalent per day, representing a 25% increase year over year.

Chris: As of quarter end, we had 519 net permanent wells 12.9 that drilled but uncompleted wells otherwise known as docs and 5.4, not completed but not producing wells otherwise known as Cox.

Chris: To sum of permitted wells Ducks Cups totalled 24.3, net wells of near term inventory, but this number reflects an all time high and a 7% higher sequential quarter over quarter, and 38% higher on a year over year basis.

Chris Steddum: This number reflects an all-time high and is 7% higher sequential quarter-over-quarter and 38% higher on a year-over-year basis. We estimate that it would take approximately 12 net wells turned to cells per year to maintain TPL's current production. Based on recent historical trends, approximately 93 percent of permitted wells are drilled within a year, approximately 90 percent of ducts are completed within a year, and approximately 96 percent of cups are turned to cells within one month. Of course, development timing may change depending on commodity price environment, but we expect our operator group to maintain steadier levels of development relative to the overall industry.

Chris: We estimate that it would take approximately 12 net wells turned to sales per year to maintain T. P. L car production based on our recent historical trends approximately 93% of permitted wells are drilled with any of you are approximately 90% of docs are completed within a year and approximately 96% of cups are turned to sales.

Chris: Within one month of course development timing may change, depending on commodity price environment, but we expect our operator group to maintain steady levels of development relative to the overall industry specifically for docs had cups. These types of wells have already had substantial capital invested in them and thus we would expect these wells.

Chris Steddum: Specifically for ducts and cups, these types of wells have already had substantial capital invested in them, and thus we would expect these wells to still be turned to cells along a relatively typical cadence, even if commodity prices were to weaken.

Chris: Still be turned to cells, along a relatively typical cadence even if commodity prices were to weaken with respect to our desalination and beneficial reuse initiatives. We now expect our phase two be desalination unit to come online by the end of the year recall. This is a 10000 barrel per day R&D test facility, where we are.

Chris Steddum: With respect to our desalination and beneficial reuse initiatives, we now expect our Phase 2B desalination unit to come online by the end of the year. Recall, this is a 10,000 barrel per day R&D test facility where we are processing oil and gas produced water and treating it to produce a high spec fresh water that could potentially be used for beneficial reuse endeavors such as grassland restoration, aquifer recharge, data center and power plant cooling, and other potential environmental and industrial uses. The desalination unit is currently being constructed and tested at our Technology and Manufacture Partners facility located in the U.S.

Chris: Assessing oil and cast produced water and treating it to produce a high spec freshwater they could potentially be used for beneficial reuse endeavors, such as grassland restoration aquifer, recharge datacenter and powerplant cooling and other potential environmental and industrial uses the.

Chris: The desalination unit is currently being constructed and tested at our technology and manufacturer partners facility located in the U S.

Chris Steddum: We are encouraged by our progress, and we believe we have identified multiple new avenues to substantially lower the operating cost of a potential commercial-scale desalination facility. Once the Phase IIb unit meets our various technical specifications, the unit will then be moved and assembled on TPL's property in Orla, Texas.

Chris: We're encouraged by our progress and we believe we have identified multiple new avenues to substantially lower the operating cost of a potential commercial scale desalination facility.

Chris: Once the phase two B unit meets our various technical specifications that unit will then be moved and assembled on T bills property and Orla, Texas.

Chris Steddum: Our CAPEX estimates related to the desalination remain unchanged. As it relates to our efforts with power and data centers, we continue to advance discussions and have not seen a material downshift in development opportunities. Recently, the Public Utility Commission of Texas approved the first extra high voltage transmission lines in ERCOT geared toward enhancing electric reliability in the Permian Basin. Portions of the proposed high-voltage transmission lines and substations will likely overlap TPL property, which we believe will drive substantial local load growth to support the oil and gas industry while unlocking solar, wind, and gas generation capacity. In addition, we are actively educating developers and pursuing opportunities where we can potentially leverage TPL desalination efforts to provide substantial supplies of high-spec freshwater for industrial use.

Chris: Our capex estimates related to the desalination remain unchanged as it relates to our efforts with power and data centers. We continue to advance discussions and have not seen a material downshift in development opportunities.

Chris: Recently, the public utility Commission of Texas approved the first extra high voltage transmission lines in ERCOT geared toward enhancing electric reliability in the Permian basin.

Chris: Portions of the proposed high voltage transmission lines, and Substations will likely overlap T. P. L property, which we believe will drive substantial local load growth to support the oil and gas industry, while unlocking solar wind and gas generation capacity.

Chris: In addition, we are actively educating developers and pursuing opportunities, where we can potentially leverage T. P. L. Desalination efforts to provide substantial supplies of high spec freshwater for industrial use now.

Chris Steddum: Now approved, we look forward to this grid infrastructure progressing towards development, and ultimately, upon completion, we think this enhances the commercial potential of the Permian overall and for the TPL land to all sorts of opportunities.

Chris: Now approved we look forward to this grid infrastructure progressing towards the element and ultimately upon completion, we think this enhances the commercial potential of the Permian overall for the T. P. L land all sorts of opportunities.

Chris: In conclusion PPL continues to set new records across major Kpis in business segments, Despite oil and gas prices remaining well below the highs over the past few years.

Chris Steddum: In conclusion, TPL continues to set new records across major KPIs and business segments despite oil and gas prices remaining well below the highs of the past few years. Our balance sheet remains exceptionally strong, which affords us our ability to execute on a strategy toward maximizing shareholder value.

Chris: Our balance sheet remains exceptionally strong, which affords us our ability to execute on our strategy toward maximizing shareholder value.

Unknown Attendee: And with that, Operator, we will now take questions. Thank you.

Speaker Change: Operator, we will now take questions.

Speaker Change: Thank you we will now conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Unknown Attendee: We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 at this time.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press starts two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing just darkies once again Thats star one at this time, one moment, while we poll for our first question.

Unknown Attendee: One moment while we pull for our first question.

Speaker Change: The first question comes from Derrick Whitfield with Texas Capital. Please proceed.

Derrick Whitfield: The first question comes from Derrick Whitfield with Texas Capitol. Please proceed. Good morning all and congrats on a record quarter. Thanks, Derrick. Good morning.

Derrick Whitfield: Good morning, all and congrats on a record quarter.

Speaker Change: Thanks, Eric and good morning.

Derrick Whitfield: Ty, maybe starting with you, certainly thanks for your thoughts, macro thoughts on the oil and gas activity and the impacts across your business segments.

Speaker Change: Hi, maybe starting with you certainly thanks for your thoughts macro thoughts on the oil and gas activity and the impacts across your business segments with.

Derrick Whitfield: With the first question, I really wanted to lean in on the water side and specifically the fundamentals, water fundamentals within Delaware Basin. Given the recent flurry of midterm announcements we've seen, it's quite clear there's significant demand for water handling. Do you have a sense on the underlying growth and produced water volumes across the basin before activity adjustments are considered? Where I'm going with this is setting aside the water-oil ratio increase within a well over time. We are broadly seeing a shift to deeper intervals, which are more water-wet, and that's seemingly driving water growth at levels elevated to that of oil growth, so any perspective you could offer on that would be greatly appreciated.

Speaker Change: The first question I really wanted to lean in on the water side and specifically the fundamentals water fundamentals within Delaware basin, given the recent flurry admits from analysis, which we've seen its quite clear there's significant demand for water handling do you have a sense on the underlying growth and produce water volumes across the basin before activity adjustments or <unk>.

Speaker Change: Centered and where I'm going with this just kind of setting aside the water oil ratio increase within a well over time.

Speaker Change: Our broadly seen a shift to deeper intervals, which are more water wet and that seemingly driving water greater levels elevated to that of oil growth. So any perspective, you get off and that would be greatly appreciated.

Speaker Change: Yeah, I mean, we're definitely seeing higher water cuts as operators move to.

Tyler Glover: Yeah, I mean, we're definitely seeing higher water cuts as operators move to second and third tier formations. I think we've seen as high as 10 to 1 on some pads, and so we expect produced water to continue to grow at a pretty rapid pace over the next 10 years, which is, you know, why we think it's important.

Speaker Change: Second and third tier.

Speaker Change: Formations.

Speaker Change: Yeah, I think I think we've seen as high as 10 to one on some pads and so we expect it will.

Speaker Change: Produced water to continue to grow at a pretty rapid pace.

Speaker Change: Over the next 10 years, which as you know why do we think.

Tyler Glover: Thank you. It's going to take out of its disposal, it's going to take. beneficial reuse. It's going to take continuing to treat and reuse more and more water to be able to effectively handle the volumes of produced water that we're going to need to, um, so that Development of Narrows, Dozens, and Bottlenecks.

Speaker Change: It's going to it's going to take to disposal, it's going to take you know beneficial reuse, it's gonna take continuing to treat and reuse more and more water to be able to effectively handle the volumes of produced water that we're going to need to them. So that you know.

Speaker Change: Development of minerals doesn't bottleneck.

Speaker Change: And then kind of along the same lines tie with those three larger pipeline projects that appear to be moving forward with water bridge western and Arris.

Tyler Glover: And then kind of along the same lines, Ty, with those three larger pipeline projects that appear to be moving forward with WaterBridge, Western, and ARIS. How does that impact you guys? Well, we think I mean, it's a benefit to the basin benefit to the development of our minerals. You know, operators need more pore space to head off potential bottlenecks on, you know, having to shut in wells or, or forego development in certain areas because of water cuts. So From that standpoint, it really is a benefit.

Speaker Change: How does that impact you guys.

Speaker Change: Well, we think I mean, it's a benefit to the basin a benefit to the development of our minerals operators need more floor space to it.

Speaker Change: [laughter] head off potential bottlenecks on you know having to shut in wells or or forego development in certain areas because of water cuts.

Speaker Change: So.

Speaker Change: From that standpoint, it really is a benefit and then I would just add to that that on the western Pathfinder pipeline.

Tyler Glover: And then I would just add, too, that on the Western Pathfinder Pipeline. We will be paid, because of our relationship with Western and where our assets sit, will be paid for those barrels that are going to move through that first phase of that project. And then the second phase of that project is a pipeline that actually goes to out-of-basin surface that we've acquired. So we'll receive payment on existing barrels that are moved to the east, and then payment on new barrels as well. So that project is a pretty fantastic benefit for TPL.

Speaker Change: We will be paid because of our relationship with western and where our assets it will be paid for those barrels.

Speaker Change: Through that first phase of that project and then the second phase of that project is a pipeline that actually goes to.

Speaker Change: Animation surface that we've acquired.

Speaker Change: So we will receive a payment on existing barrels that are moved to the east and then a payment on a new barrels as well so.

Speaker Change: That project is a it's a pretty fantastic benefit for T. P L and Robert I don't I don't know if you have anything to add to.

Robert Crain: Robert, I don't know if you have anything to add to any of those questions. Yeah, I'll add on the first one really quick. You know, from a just strictly volume standpoint, you know, varying numbers on how it's calculated on where we at it today on total Delaware, you know, produced water production, probably somewhere in the 12 to 15 million. I think if you look at most forecasts, Derrick, as you see the proliferation of those secondary benches start to development start to occur. You're probably, you know, getting into the 18 to 20 million barrels a day, 2028 through 2030.

Speaker Change: Any of those questions.

Speaker Change: Yes.

Speaker Change: The first one really quick.

Speaker Change: You know from just strictly volume standpoint.

Speaker Change: Any numbers on how it's calculated on where are we at today I'm told the Delaware produced water production.

Speaker Change: Probably somewhere in the 12 to 15 million.

Speaker Change: I think if you look at more most forecast Derek.

Speaker Change: As you see the cooperation of the secondary bench would start to a development start to occur.

Speaker Change: Youre probably getting.

Speaker Change: Getting into the 18 to 20 million barrels a day in 2028% or 2030 so.

Robert Crain: So, as Ty mentioned, secondary out-of-base disposal, beneficial reuse has to occur, you know, just our stance on out-of-base. And I'll say we truly led the charge on it from the beginning, you know, and saw this trend coming, you know, many years ago, as we knew it was going to take a little bit of time for beneficial reuse to get there from a technology and a regulatory standpoint. You know, led the charge on that and continue to help facilitate the development and the redistribution of volumes, because as Ty's mentioned, a lot of our legacy contracts, you know, we still take part and we'll be compensated on those volumes moving, even if it, perhaps in the early phases, certain projects are not moving directly to our acreage and there's still compensation as we help redistribute those volumes.

Todd: As Todd mentioned.

Todd: Secondary basically disposal beneficial reuse.

Todd: It has to occur.

Todd: Just you know are our stats on a base of let's say, we truly led the charge on that from the beginning.

Todd: And saw this trend coming.

Todd: Many years ago as we knew it was going to take a little bit time for beneficial reuse to get there from a technology and a regulatory standpoint.

Todd: Led the charge on that and continue to.

Todd: Facilitate the development and the redistribution of volumes could be as high as mentioned a lot of our legacy contracts.

Todd: Yeah.

Todd: We still take part will be compensated on those volumes moving even if it perhaps in the early phases certain projects are not moving directly to our acreage.

Todd: And they're still compensation.

Todd: As we help them distribute those volumes.

Speaker Change: That's great color and then lastly could you guys offer some perspective on the M&A landscape in the basin at present I realized volatility tends to create challenges with deal flow, having said that we are seeing some transactions clear on the on the E&P side. So any perspective, you guys could get off run kind of frame.

Derrick Whitfield: That's great color.

Derrick Whitfield: And then lastly, could you guys offer some perspective on the M&A landscape in the basin at present? I realize volatility tends to create challenges with dill flow. Having said that we are seeing some transactions clear on the on the EMP side.

Tyler Glover: So any perspective you guys could offer on kind of framing up the competitive landscape for both minerals and surface would be greatly appreciated. Yeah, I mean, I think on the M&A front, there's still a lot of opportunity. We haven't seen a big pullback from sellers. You know, if commodity prices continue to decrease, the bid ask spread may widen. But right now, it still seems like a pretty friendly environment, a lot of opportunity in the pipeline.

Todd: Going up the competitive landscape for both minerals and surface would be greatly appreciate it.

Speaker Change: Yeah, I mean, I think on the M&A front, there's still a lot of opportunity we haven't seen a big pull back from sellers.

Speaker Change: You know if commodity prices continue to decrease there the bid ask spreads widen but right now.

Speaker Change: It still seems like a pretty friendly environment a lot of opportunity.

Speaker Change: Uh huh.

Speaker Change: Alright, very helpful I'll turn it back to the operator thanks.

Derrick Whitfield: Alright, very helpful.

Unknown Attendee: I'll turn it back to the operator. Thank you.

Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.

Unknown Attendee: This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Unknown Attendee: Hamed Khorsand, Derrick Whitfield, John Annis, Unknown Attendee, Chris Steddum, Tyler Glover,