Q2 2026 Texas Pacific Land Corp Earnings Call

August 6, 2026

Speaker #1: Greetings and welcome to the Texas Pacific Land Corporation second quarter 2026 earnings conference call. At this time, all participants or any listen-only mode. A question and answer session will follow the formal presentation.

Operator: Greetings, and welcome to the Texas Pacific Land Corporation Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Shawn Amini, Vice President of Finance and Investor Relations. Please go ahead.

Speaker #1: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Shawn Amini, Vice President of Finance and Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Thank you for joining us today for Texas Pacific Land Corporation second quarter 2026 earnings conference call. Yesterday afternoon, the company released its financial results and filed its form.

Shawn Amini: Thank you for joining us today for Texas Pacific Land Corporation Q2 2026 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. 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. 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 filings. During this call, we'll also be discussing certain non-GAAP financial measures.

Speaker #2: Thank you with the security and exchange commission. Which is available on the investor section of the company's website at www.texaspacific.com. As a reminder for marks made on today's conference call may include for looking statements.

Speaker #2: For looking statements are subject to risk uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our for looking statements in light of new information or future events.

Speaker #2: For 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 filings.

Speaker #2: During this call, we will also be discussing certain non-GAAP financial measures. More information and reconciliations about these non-GAAP financial measures are contained in our earnings release and SEC filings.

Shawn Amini: More information and reconciliations about these non-GAAP financial measures are contained in our earnings release and SEC filings. Please also note, we may at times refer to our company by its stock ticker, TPL. This morning's conference call is hosted by TPL's Chief Executive Officer, Tyler Glover, TPL's Chief Financial Officer, Chris Steddum, and Executive Vice President of Texas Pacific Water Resources, Robert Crain. Management will make some prepared comments, after which we will open the call for questions. Now, I will turn the call over to Ty.

Speaker #2: Please also note we may at times refer to our company by its stock ticker, DPL. This morning's conference call is hosted by TPL's Chief Executive Officer, Ty Glover, TPL's Chief Financial Officer, Chris Steddum, and Executive Vice President of Texas Pacific Water Resources, Robert Crane.

Speaker #2: Management will make some prepared comments after which we will open the call for questions. Now, I will turn the call over to Ty.

Speaker #3: Good morning, everyone, and thank you for joining us today. This quarter, we delivered exceptional results across major financial and operating metrics and achieved significant milestones towards key growth initiatives.

Tyler Glover: Good morning, everyone, and thank you for joining us today. This quarter, we delivered exceptional results across major financial and operating metrics and achieved significant milestones towards key growth initiatives. TPL generated record quarterly total revenue, net income, and free cash flow. These results were supported by record oil and gas royalty production and produced water royalty volumes. Oil and gas royalty production averaged approximately 39,700 barrels of oil equivalent per day, up 7% sequentially and 20% year-over-year. Our unhedged royalty position allowed us to benefit fully from the strong oil price environment. 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.

Speaker #3: TPL generated record quarterly total revenue, net income, and free cash flow. These results were supported by record oil and gas royalty production and produce water royalty volumes.

Speaker #3: Oil and gas royalty production averaged approximately $39,700 barrels of oil equivalent per day up 7% sequentially and 20% year over year. In addition, our unhedged royalty position allowed us to benefit fully from the strong oil price environment.

Speaker #3: Produce 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.

Speaker #3: Water sales volumes of $663,000 barrels per day represent the 19% decline sequentially and a 38% increase year over year. Second quarter water sales volumes have been impacted by weak in basin natural gas prices as operators have shifted some development away from the Delaware basin.

Tyler Glover: Water sales volumes of 663,000 barrels per day represents a 19% decline sequentially and a 38% increase year-over-year. Q2 water sales volumes have been impacted by weak in-basin natural gas prices as operators have shifted some development away from the Delaware Basin. Substantial new gas pipeline capacity enters service over the next few quarters, and we would expect some mix shift towards the Delaware as local in-basin gas price differentials improve. For SLIM, revenues of $24 million, which represents a 37% sequential increase, were driven by strong performance for pipeline and wellbore easements. With respect to our data center and power generation efforts, we disclosed that a previously announced land sale and water supply agreement was related to Project Gilby, which is a large-scale power generation facility Chevron is developing to support a customer data center in Reeves County, Texas.

Speaker #3: However, substantial new gas pipeline capacity in her service over the next few quarters that we would expect some mixed shift towards the Delaware as local in basin gas price differentials improve.

Speaker #3: More slim revenues of $24 million which represents a 37% sequential increase were driven by strong performance for pipeline and wellbore easements. With respect to our data center and power generation efforts, we disclosed that a previously announced land sale and water supply agreement was related to Project Kilby which is a large scale power generation facility Chevron is developing to support a customer data center in Reeves County, Texas.

Speaker #3: This multi-gigawatt power and data center development represents a substantial commitment by some of the largest energy and technology companies in the world, and this validates the Permian as an attractive data center infrastructure hub capable of accommodating hyperscale facilities.

Tyler Glover: This multi-gigawatt power and data center development represents a substantial commitment by some of the largest energy and technology companies in the world, this validates the Permian as an attractive data center infrastructure hub capable of accommodating hyperscale facilities. During the quarter, we acquired over 10,000 acres of land in Shackelford and Jones County, Texas, for approximately $100 million. This region is amongst the fastest-growing data center regions in the country, this acquisition further expands our strategic data center and power generation efforts beyond the immediate Permian Basin. This land was attractive due to its contiguousness, land and water resources, access to natural gas and grid infrastructure, established fiber, and proximity to a mid-sized city. We are also progressing on a number of projects with various high-quality hyperscalers and AI labs, which also includes our joint effort alongside Bolt Data and Energy.

Speaker #3: In addition, during the quarter, we acquired over 10,000 acres of land in Shackleford and Jones County, Texas, for approximately $100 million. This region is amongst the fastest growing data center regions in the country, and this acquisition further expands our strategic data center and power generation efforts beyond the immediate Permian basin.

Speaker #3: This land was attractive due to its contiguousness, land and water resources, access to natural gas and grid infrastructure, established fiber, and proximity to a midsize city.

Speaker #3: We are also progressing on a number of projects with various high quality hyperscalers and AI labs which also includes our joint effort alongside Bolt Beta and Energy.

Speaker #3: Deal execution requires extensive work involving many counterparties and thorough wide ranging diligence, and our conversations revolve around multiple verticals such as land, water, aggregates, and other aspects.

Tyler Glover: Deal execution requires extensive work involving many counterparties and thorough, wide-ranging diligence, our conversations revolve around multiple verticals such as land, water, aggregates, and other aspects. West Texas is rapidly becoming a dominant global hub for power and compute, it's apparent that developers and customers remain keenly motivated to expand their power and compute footholds in the regions. We will be able to provide more specific details as our commercial efforts turn into executed agreements. Turning to our produced water desalination efforts, we have completed construction and commenced commissioning on our desalination facility located in Orla, Texas, which we refer to as Phase Two B. Eventually ramping the facility to its 10,000 barrel a day capacity will allow us to demonstrate that produced water desalination can work at scale.

Speaker #3: West Texas is rapidly becoming a dominant global hub for power and compute, and its apparent that developers and customers remain keenly motivated to expand their power and compute footholds in the regions.

Speaker #3: We will be able to provide more specific details as our commercial efforts turn into executed agreements. Turning to our produce water desalination efforts, we have completed desalination facility located in Orla, Texas, which we refer to as Phase 2B.

Speaker #3: Eventually ramping the facility to its 10,000 barrel a day capacity will allow us to demonstrate that produce water desalination can work at scale. Our desalination effort leverages our patented freeze desalination process where we also have equipment exclusivity for oil and gas applications with one of the country's leading providers of industrial scale process cooling solutions.

Tyler Glover: Our desalination effort leverages our patented freeze desalination process, where we also have equipment exclusivity for oil and gas applications with one of the country's leading providers of industrial-scale process cooling solutions. In addition, this year, we will be implementing various desalination co-location studies. Our freeze desalination process will generate large volumes of ice and chilled water, which then could potentially be used by data centers for chip cooling. Furthermore, we are also investigating the utilization of waste heat recovery equipment to enhance our desalination process and reduce our energy consumption. There is also additional optionality to monetize both the high-spec freshwater and concentrated brine output streams from the facility.

Speaker #3: In addition, this year we will be implementing various desalination co-location studies. Our freeze desalination process will generate large volumes of ice and chilled water which then could potentially be used by data centers for chip cooling.

Speaker #3: Furthermore, we are also investigating the utilization of waste heat recovery equipment to enhance our desalination process and reduce our energy consumption. There is also additional optionality to monetize both the high spec freshwater and concentrated brine output streams from the facility.

Speaker #3: Desalinated produced water represents an interesting opportunity as it is not part of the hydrologic cycle. Thus, high-spec desalinated freshwater could meet standards for irrigation, industrial cooling, rangeland rehabilitation, stream flow augmentation, and data center cooling, thereby reducing demands on existing local water resources.

Tyler Glover: Desalinated produced water represents an interesting opportunity as it is not part of the hydrologic cycle, and thus high-spec desalinated fresh water could meet standards for irrigation, industrial cooling, rangeland rehabilitation, stream flow augmentation, and data center cooling, thereby reducing demands on existing local water resources. The concentrated brine may also enhance economics of produced water valorization by extracting valuable minerals such as lithium. We're excited to finally have completed construction on our Phase Two facility, as produced water desalination at scale could help significantly reduce traditional injection demands. In addition, energy super majors and large independents, hyperscalers, and AI labs have shown strong interest related to the commercial and operational opportunities related to co-location and output water streams.

Speaker #3: The concentrated brine may also enhance economics of produce water valorization by extracting valuable minerals such as lithium. We're excited to finally have completed construction on our Phase 2 facility as produce water desalination at scale could help significantly reduce traditional injection demands.

Speaker #3: In addition, energy super majors and large independence hyperscalers and AI labs have shown strong interest related to the commercial and operational opportunities related to co-location and output water streams.

Speaker #3: Our Orla Phase 2 facility will provide interested parties with a tangible, real-world exhibit of how we can turn an oil field waste product into something with highly positive commercial and environmental attributes.

Tyler Glover: Our Orla Phase Two facility will provide interested parties with a tangible real-world exhibit of how we can turn an oil field waste product into something with highly positive commercial and environmental attributes. We look forward to providing more updates in the coming quarters as we operate the facility and as business discussions advance. With that, I'll hand the call over to Chris.

Speaker #3: We look forward to providing more updates in the coming quarters as we operate the facility and as business discussions advance. With that, I'll hand the call over to Chris.

Speaker #2: Thanks, Ty. Consolidated revenues during the second quarter 2026 were approximately $246 million this represents a quarterly all time high as well as a 4% sequential increase and a 31% increase year over year consolidated adjusted EBITDA was $216 million which was up 19% sequentially and 30% year over year.

Chris Steddum: Thanks, Ty. Consolidated revenues during Q2 2026 were approximately $246 million. This represents a quarterly all-time high, as well as a 4% sequential increase and a 31% increase year-over-year. Consolidated adjusted EBITDA was $216 million, which was up 19% sequentially and 30% year-over-year. Our adjusted EBITDA margin for the quarter was 88%. Free cash flow was $156 million, which was up 14% sequentially and up 20% year-over-year. Moving to our well inventory. 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. That amounts to 18.4 net line of sight wells. Year to date, capital expenditures were $29 million.

Speaker #2: Our adjusted EBITDA margin for the quarter was 88%. Free cash flow was $156 million, which was up 14% sequentially and up 20% year over year.

Speaker #2: Moving to our well inventory, as of quarter end, GPL had 5.6 net permitted wells 9.5 net drilled but uncompleted wells were commonly referred to as ducts and 3.4 net completed but not producing wells that amounts to 18.4 net line of sight wells year to date capital expenditures were $29 million as Ty discussed in the second half of this year we will be spending capital to investigate co-location cooling and wait heat capture opportunities at our Orla Phase 2B desalination facility.

Chris Steddum: As Ty discussed, in the H2 of this year, we will be spending capital to investigate co-location cooling and waste heat capture opportunities at our Orla Phase Two B desalination facility. This spend was embedded in our original CapEx guidance at the beginning of the year, we reaffirm that fiscal year guide of $65 million to $75 million. With that, operator, we will now take questions.

Speaker #2: This spend was embedded in our original CapEx guidance at the beginning of the year, and we reaffirm that fiscal year guidance of $65 million to $75 million. With that, operator, we will now take questions.

Speaker #1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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. First question comes from Derrick Whitfield with Texas Capital. Please go ahead.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two 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.

Speaker #1: First question comes from Derek Whitfield with Texas Capital. Please go ahead.

Derrick Whitfield: Thanks. Good morning, all, and thanks for your time.

Speaker #3: Thanks. Good morning all and thanks for your time.

Speaker #2: Good morning, Derek.

Tyler Glover: Morning, Derrick.

Speaker #3: One of my first question I wanted to start with the surface acquisition that you made in Shackleford and Jones counties. While a bit of a step out, it's clear to us that it was bought on more than a hunch how would you guys frame the opportunity with this kind of build out and this project potential and the amount of revenue streams it could involve?

Derrick Whitfield: My first question, I wanted to start with the surface acquisitions you made in Shackelford and Jones Counties. While a bit of a step out, it's clear to us that it was bought on more than a hunch. How would you guys frame the opportunity with this kind of build-out and this project potential and the amount of revenue streams it could involve?

Speaker #2: Yeah, that's a good question, Derek. 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.

Tyler Glover: Yeah, that's a good question, Derek. It is a little bit of a step out, we think the power and compute opportunity in West Texas is enormous and broader than just the Permian and our legacy footprint. We've been doing diligence on that property for over a year now, just making sure that it specs out. That area was interesting to a compute user that we've been working with for a while now. I think we've demonstrated to the tech community that our team has the expertise to locate land, water, gas resources, even if it's outside of our legacy footprint. I think it just adds some flexibility to the value proposition of TPL. We're excited about it. We think we can replicate it.

Speaker #2: And so we've been doing diligence on that property for over a year now. Make sure that it specs out that area was interesting to a compute user that we've been working with for a while now.

Speaker #2: And so I think we've demonstrated to the tech community that our team has the expertise to locate land, water, gas resources even if it's outside of our legacy footprint.

Speaker #2: And so I think it just adds some flexibility to the value proposition of TPL we're excited about it. We think we can replicate it and I think question about the value chain it's very similar to our other properties and how we look at the oil and gas business.

Tyler Glover: I think, the question about the value chain, it's very similar to our other properties and how we look at the oil and gas business. We want to be as involved in the project as we can, while still being really capital light. Land use, water, aggregates, just clipping coupons through the kind of the entire life cycle of that project so that we capture as much of the value chain as we possibly can.

Speaker #2: We want to be as involved in the project as we can while still being really capital light. And so land use, water, aggregates just clipping coupons through the kind of the entire life cycle of that project so that we capture as much of the value chain as we possibly can.

Speaker #3: Great. And then as my follow up, I wanted to focus on the water desal. But specifically water desal for ship cooling. How would you frame the depth of interest you're seeing in your conversations with hyperscalers and AI labs given the fact that it is water additive to the hydrologic cycle?

Derrick Whitfield: Great. As my follow-up, I wanted to focus on the water desal, but specifically water desal for chip cooling. How would you frame the depth of interest you're seeing in your conversations with hyperscalers and AI labs, given the fact that it is water additive to the hydrologic cycle? I think it's a huge selling point that you guys have in your process.

Speaker #3: I think it's a huge selling point that you guys have in your process.

Speaker #2: Yeah, I mean, the interest in produced water in data center use is huge. And I think it's not just one stream. When you look at it, let's just start with the consumptive piece.

Robert Crain: The interest in produced water in data center use is huge. I think it's not just one stream. When you look at it, let's start with just the consumptive piece. There still is some evaporative cooling and adiabatic assist that is water consumptive that goes into data center, not just chip cooling, but building cooling. Obviously, that's your first one that everybody hits on because it is water that's not in the hydrologic cycle. Next, you move into something that's more specific to our technology that we're in a lot of discussions with a couple hyperscalers and AI labs on, that's using our freeze technology for direct chip cooling.

Speaker #2: Think there still is some evaporative cooling and additive attic assist that is water consumptive that goes into data center not just chip cooling but building cooling.

Speaker #2: Obviously, that's your first one that everybody hits on. Because it is water that's not in the hydrologic cycle. Next, you move into something that's more specific to our technology that we're in a lot of discussions with a couple hyperscalers and AI labs on and that's using our freeze technology for direct tip cooling.

Speaker #2: If you look at the heat transfer that a hyperscaler uses for direct chip, it's a fraction of the heat transfer that we look at when we're getting this water down to sub 15 degrees Fahrenheit.

Robert Crain: If you look at the heat transfer that a hyperscaler uses for direct chip, it's a fraction of the heat transfer that we look at when we're getting this water down to sub 15 degrees Fahrenheit to be able to remove the salts from the water. That's another fit. All of it goes towards a water positivity or water neutrality goal. A couple other aspects that we're chasing just to reduce that consumption on any municipal or type of traditional water sourcing that they typically use today.

Speaker #2: To be able to remove the salts from the water. So that's another fit. All of it goes toward a water positivity or water neutrality goal a couple other aspects that we're chasing.

Speaker #2: Just to reduce that consumption on any municipal or type of traditional water sourcing that they typically use today.

Speaker #3: That's perfect. Great update, guys. Thanks.

Derrick Whitfield: Terrific. Great update, guys. Thanks.

Speaker #1: Next question. Tim Risbon with KeyBanc Capital Markets, please go ahead.

Operator: Next question, Tim Rezvan with KeyBanc Capital Markets, please go ahead.

Speaker #4: Thanks, folks, for taking our questions. Derek touched on the topics of interest to me, but I thought I'd follow up a little more on this.

Tim Rezvan: Thanks, folks, for taking our questions. Derrick touched on the topics of interest to me, I thought I'd follow up a little more on this acreage acquisition. I think a little bit of surprise is that you all have almost 1 million surface acres already. I know the opportunity set is vast on power and compute, should we be expecting potential sizable acquisitions like this in the future? I guess the idea is how much of the opportunity can you leverage off your existing footprint versus needing to buy more?

Speaker #4: Acreage acquisition. I think a little bit of surprise is that you all have almost a million surface acres already. I know the opportunity set is vast on power and compute, but should we be expecting potential sizable acquisitions like this in the future?

Speaker #4: I guess the idea is how much of the opportunity can you leverage off your existing footprint versus needing to buy more?

Speaker #2: Yeah, look, we're looking at it the same way we did when we started the water business, right? The primary objective is to develop the existing resource that we already have, but we're simultaneously looking for other opportunities.

Tyler Glover: Yeah, look, we're looking at it the same way we did when we started the water business, right? The primary objective is to develop the existing resource that we already have, we're simultaneously looking for other opportunities. Like I mentioned, I think the opportunity set here is beyond our legacy footprint, why let someone else capture that value? Very similar to how we've built the water business, like I said, we are looking at both options simultaneously. I would just say, 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.

Speaker #2: Like I mentioned, I think the opportunity set here is beyond our legacy footprint. And so why let someone else capture that value? And so very similar to how we've built the water business.

Speaker #2: Like I said, we are looking at both options simultaneously. And I would just say we're in advanced conversations with multiple hyperscalers, AI labs, and power generators on 25 gigawatts of projects right now.

Speaker #2: I would be disappointed if we don't announce at least one or more major definitive agreements in the near term. So with an opportunity set like that that's growing by the week, we feel like we owe it to our shareholders to look outside of our existing footprint.

Tyler Glover: With an opportunity set like that that's growing by the week, we feel like we owe it to our shareholders to look outside of our existing footprint.

Speaker #4: Okay, that's good context, especially on the scale—25 gigawatts is a big number. So if I could switch gears a little bit, on produced water royalty volumes—you touched on it.

Tim Rezvan: Okay. That's good context, especially on the scale. 25 gigawatts is a big number. If I could switch gears a little bit. Produced water royalty volumes, you touched on it. It was a record in Q2. Looking at sort of the revenue per barrel, it was at the high end, about a little over $0.08 a barrel. Should we be modeling that to continue to kind of ramp? I mean, we know the broader trends in the business, just kind of curious how you see that trending over the next year or two.

Speaker #4: It was a record in the second quarter. And looking at sort of the revenue per barrel, it was at the high end about a little over 8 cents a barrel.

Speaker #4: Should we be modeling that to continue to kind of ramp? I mean, we know the broader trends in the business, but just kind of curious how you see that trending over the next year or two.

Speaker #2: Well, we've got price escalators built in our existing contracts. And I think poor space will become more valuable over time. I would say the one caveat is transportation royalties are typically a little less than an actual poor space injection royalty.

Tyler Glover: Well, we've got price escalators built in our existing contracts, I think pore space will become more valuable over time. I would say the one caveat is transportation royalties are typically a little less than an actual pore space injection royalty. As that mix changes, you should see that royalty kind of stay steady to increasing over time.

Speaker #2: And so as that mix changes, you should see that royalty kind of stay steady to increasing over time.

Speaker #4: Okay. Okay. Appreciate that. If I could just ask one more question on your minerals business, it's biggest revenue component, but probably the least discussed segment.

Tim Rezvan: Okay. Appreciate that. If I could just ask one more question on your minerals business. It's the biggest revenue component, probably the least discussed segment. We saw oil tick down about 5% in Q2, which is a little contrary to sort of comments from large operators about pulling volumes forward into higher oil prices. Can you comment on kind of maybe what happened and maybe how you see oil volumes trending amid the rig ramp in the Permian? Thanks.

Speaker #4: We saw oil tick down about 5% in the second quarter, which is a little contrary to comments from large operators about pulling volumes forward into higher oil prices.

Speaker #4: So can you comment on kind of maybe what happened and maybe how you see oil volumes trending amid the rig ramp and the Permian?

Speaker #4: Thanks.

Speaker #3: Yeah. Yeah, Tom. We I think there's a couple factors. One, I think I would just start by saying I don't think the lower oil percentage is a near-term trend for us.

Robert Crain: Yeah. Tim, I think there's a couple factors. One, I think I would just start by saying, I don't think the lower oil percentage is a near-term trend for us. I think this quarter and even last quarter to some extent was a bit unique. There's probably some accounting noise as some of our new acquisitions come online. We also just had a lot of heavy development that was occurring late last year, really throughout 2025 in areas that are pretty gas-rich, including one of our other acquisitions. A couple of our acquisitions were some really high-interest wells in Culberson County, were drilled over a pretty short timeframe. I think our expectation is we were kind of mid 30% oil cuts. I do think that's going to trend back up.

Speaker #3: I think kind of this quarter and even last quarter to some extent, was a bit unique. There's probably some accounting noise as some of our new acquisitions come online.

Speaker #3: We also just had a lot of heavy development that was occurring late last year, really throughout 2025 in areas that are pretty gas-rich. Including one of our other acquisitions.

Speaker #3: A couple of our acquisitions were some really high-interest wells in Culberson County. We drilled over a pretty short timeframe, and so I think our expectation is we were kind of mid-30% oil cuts.

Speaker #3: I do think that's going to trend back up. And if you look at it as a more normalized long-term should get back up 40% plus over time.

Robert Crain: If you look at it as a more normalized long-term, should get back up 40% plus over time. Really more kind of something unique to TPL. The reality is, even as diversified as our royalty interests are

Speaker #3: So really, more kind of something unique to TPL, and the reality is, even as diversified as our royalty interests are, the way that people operate—they can park a rig and a completion crew in an area, and can affect some of the mix. With drilling a whole bunch of three- and four-mile laterals, the production that comes online can be significant.

Chris Steddum: The way that people operate, they can park a rig and a completion crew in an area and can affect some of the mix with drilling a whole bunch of three- and four-mile laterals. The production that comes online can be significant. There's a lot of different factors that I think led to what we might see as a pretty high gas cut. I do think we will see both that oil trend back up and become a more meaningful part of the production mix on a go-forward basis.

Robert Crain: The way that people operate, they can park a rig and a completion crew in an area and can affect some of the mix with drilling a whole bunch of three- and four-mile laterals. The production that comes online can be significant. There's a lot of different factors that I think led to what we might see as a pretty high gas cut. I do think we will see both that oil trend back up and become a more meaningful part of the production mix on a go-forward basis.

Speaker #3: And so there's a lot of different factors that I think led to the what we might see as a pretty high gas cut but I do think we will see both at oil trend back up and become a more meaningful part of the production mix on a go forward basis.

Speaker #4: Okay. Appreciate the comments. Thank you.

Tim Rezvan: Okay. Appreciate the comments. Thank you.

Speaker #2: Thanks, Tom.

Chris Steddum: Thanks, Tim.

Speaker #1: Next question. Oliver Huang with Tudor Pickering. Please go ahead.

Operator: Next question, Oliver Huang with Tudor, Pickering. Please go ahead.

Speaker #5: Good morning, TPL team, and thanks for taking the questions. I just wanted to hit on, I guess, thoughts around the buyback.

Oliver Huang: Good morning, TPL team, and thanks for taking the questions.

Chris Steddum: Morning.

Oliver Huang: Just wanted to hit on, I guess, thoughts around the buyback. I know there have been some royalty bolt-ons over the past 12 to 18 months in addition to the land acquisition here. It's been several quarters since there's been anything meaningful on the buyback front. Just trying to get a better understanding, how does this reflect your current view of where the equity sits from a valuation perspective? Is this something that's being purposefully done just to build capital for bigger near-term asks across whether it be royalty, M&A, land, power, or desal investments?

Speaker #5: I mean, I know there have been some royalty bulletins over the past 12 to 18 months, in addition to the land acquisition here. But it's been several quarters since there's been anything meaningful on the buyback front.

Speaker #5: Just trying to get a better understanding—how does this reflect your current view of where the equity sits from a valuation perspective? Is this something that's being purposefully done just to build capital for bigger near-term asks, whether it be royalty M&A, land, power, or desal investments?

Speaker #3: Yeah. Right now, there's a lot of really good opportunity set, as we've seen. The Shackleford acquisition is one of those. And I think one of our big thoughts when it comes to capital allocation is kind of turning those dollars toward best and highest use.

Chris Steddum: Right now, there's a lot of really good opportunity set, as we've seen. The Shackelford acquisition is one of those. I think one of our big thoughts when it comes to capital allocation is kind of turning those dollars toward best and highest use. We just continue to see a lot of great opportunities out there where we feel like we want to be kind of in that cash build mode for now. That's not to say that in the future we retain the right to go out and do buybacks if that, at the time, becomes what we would view as a very attractive use of capital. So it is always on our mind. We are always considering that as a way to deploy our capital.

Speaker #3: And we just continue to see a lot of great opportunities out there where we feel like we want to be kind of in that cash build mode for now.

Speaker #3: And that's not to say that in the future, we retain the right to go out and do buybacks if that at the time becomes what we would view as a very attractive use of capital.

Speaker #3: And so, it is always on our mind. We are always considering that as a way to deploy our capital as we sit here today, in the environment that we're in right now.

Chris Steddum: As we sit here today in the environment that we're in right now, building cash seems like and deploying it for some of these other opportunities is kind of where we want to focus. Buybacks are always on the table and something we're constantly looking at.

Speaker #3: Building cash seems like and deploying it for some of these other opportunities. It's kind of where we want to where we want to focus.

Speaker #3: But buybacks are always on the table and something we're constantly looking at.

Oliver Huang: Okay, perfect. Maybe just a follow-up on desal. Apologies if I missed it earlier, but just any sort of color in terms of just initial takeaways. How has what you all seen early on just kind of changed your conviction level in terms of what next steps might be, and what should we kind of be watchful for on that front?

Speaker #5: Okay, perfect. Maybe just a follow-up on desal. Apologies if I missed it earlier, but just any sort of color in terms of initial takeaways?

Speaker #5: How is what you all seen early on? Just kind of changed your conviction level in terms of what next steps might be? And what should we kind of be watchful for on that front?

Robert Crain: If anything, over the time, our belief that beneficial reuse and produced water desal will take hold as part of that mix only grows stronger. I think if you look at total water production, it continues to climb. It will continue to climb as you get into some of these Tier 2 zones that just have a higher water cut. We were some of the first early adopters that's why we are where we are and ahead of the industry in terms of facilities, because we knew it was going to be part of that takeaway mix. That belief only gets stronger. I think what helps even strengthen that further is the interest we're seeing from the hyperscalers and the AI labs for eventually implementing this into a sourcing mix as we see the compute build-out in West Texas. To note, we're done in build. We're commissioning.

Speaker #2: If anything, over the time, our belief that beneficial reuse and produced water desal will take hold as part of that mix only grows stronger.

Speaker #2: I think if you look at total water production, it continues to climb. It will continue to climb as you get into some of these tier two zones.

Speaker #2: That just have a higher water cut. So we were some of the first early adopters to that's why we are where we are and ahead of the industry and because of facility is because we knew it was going to be part of that takeaway mix.

Speaker #2: That belief only gets stronger. I think what helps even strengthen that further is the interest we're seeing from the hyperscalers and the AI labs for eventually implementing this into a sourcing mix as we see the compute build out in West Texas.

Speaker #2: To note, we're done in build. We're commissioning. Actually, on Monday, we will be hosting our grand opening in ribbon cutting at the facility. The interest we're seeing not just from the operators will be attending legislators, regulators, but also multiple hyperscalers.

Robert Crain: Actually, on Monday, we will be hosting our grand opening and ribbon cutting at the facility. The interest we're seeing, not just from the operators who will be attending, legislators, regulators, but also multiple hyperscalers that will be on site with us on Monday as we commission the facility.

Speaker #2: That will be on-site with us on Monday as we commission the facility.

Oliver Huang: Awesome. Maybe one more follow-up if I could squeeze it in. Just kind of on your earlier comments with working with the compute user in the Shackelford, Jones County area. Any sort of color as to how quickly you can recycle the opportunity set into actual revenue dollars that start to come through the financial statements?

Speaker #5: Awesome. Maybe one more follow-up if I could squeeze it in. Just kind of on your earlier comments with working with the compute user and the Shackleford-Jones County area.

Speaker #5: Any sort of color as to how quickly you can recycle the opportunity set into actual revenue dollars that start to come through the financial statements?

Chris Steddum: Repeat the last part of that question. Sorry.

Speaker #3: Repeat the last part of that question. Sorry.

Oliver Huang: Just how quickly could we start seeing actual revenue dollars start to come through the financial statements given that specific opportunity set?

Speaker #5: Just how quickly could we start seeing actual revenue dollars come through the financial statements, given that specific opportunity set?

Tyler Glover: Yeah, like I said, that's one that we've been working on for a while. We're a year into diligence. We're working with Bolt to develop that project. We've already started working with the local communities there on tax abatements and other things that are kind of like the tail end of the diligence process. That's one that I would be very disappointed if we don't have a definitive agreement to announce in the very near term.

Speaker #3: Yeah. Like I said, that's one that we've been working on for a while. We're a year into diligence. We're working with Bolt to develop that project.

Speaker #3: We've already started working with the local communities there. On tax abatements and other things that are kind of like the tail end of the diligence process.

Speaker #3: So that's one that I would be very disappointed if we don't have a definitive agreement to announce in the very near term.

Robert Crain: Yeah. Real quick follow-up on what we see as this opportunity and how we're preparing for it. When we look at the near-term sourcing mixes that we're looking for these data centers and what we need to do to prepare for it, the water sourcing is varied. The eventual goal is to get produced water into data center usage. Near term, we know we have to build out a team and build out systems for the non-potable construction water usage, the potable water that goes into the man camps, and even as far as the demin water that's used in the closed-loop system. When we look at that, we know we've got to build a new division, a new team around that. Bring in folks that, the chemists of the world, and these direct chip design guys, cooling design, closed-loop system. It's moving fast.

Speaker #2: Yeah, real quick follow-up on what we see as this opportunity and how we're preparing for it. When we look at the near-term sourcing mixes that we're looking for these data centers and what we need to do to prepare for it, the water sourcing is varied.

Speaker #2: The eventual goal is to get produced water into data center usage, but near-term, we know that we have to build out a team and build out systems for the non-potable construction water usage.

Speaker #2: The potable water that goes into the man camps, and even as far as the demand water that's used in the closed-loop system—so when we look at that, we know we've got to build a new division, a new team around that.

Speaker #2: Bring in folks—that is, the chemists of the world and these direct chip design guys, cooling design, closed-loop systems. So it's moving fast. It's moving rapidly, as Ty said.

Robert Crain: It's moving rapidly, as Ty said. It kind of is growing by the week right now as we see the interest in West Texas compute.

Speaker #2: It kind of is growing by the week right now as we see the interest in West Texas compute.

Oliver Huang: Makes sense. Thanks for the time, guys.

Speaker #5: Makes sense. Thanks for your time, guys.

Chris Steddum: Thank you.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. We thank you for your participation.

Speaker #3: Thank you.

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