Texas Pacific Land (NYSE:TPL) Q4 2025 Earnings call February 19, 2026 10:30 AM ET Company ParticipantsChris Steddum - CFODerrick Whitfield - Managing Director and Head of Energy Equity ResearchOliver Huang - Director of Research DepartmentRobert Crain - EVP of Texas Pacific Water ResourcesShawn Amini - VP of Finance and Investor RelationsTyler Glover - CEOConference Call ParticipantsTim Rezvan - Managing Director and Equity Research AnalystOperatorGreetings, and welcome to the Texas Pacific Land Corporation ...

Financial Data and Key Metrics Changes - Consolidated revenues for Q4 2025 were approximately $212 million, with adjusted EBITDA of $178 million and an adjusted EBITDA margin of 84% [15] - Free cash flow for Q4 was $119 million, and for the full year 2025, record free cash flow reached approximately $498 million, an 8% year-over-year increase [15][16] - Full year 2025 oil and gas royalty production increased by 29% year-over-year, while water sales volumes increased by 4% and produced water royalty volumes increased by 25% [15][16] Business Line Data and Key Metrics Changes - Oil and gas royalty production grew 23% year-over-year in Q4, while water sales volumes exceeded 1 million barrels per day for the first time, growing 36% year-over-year [4] - Produced water royalty volumes grew 22% year-over-year [4] - The company achieved a 3-year compounded annual growth rate of 17% for oil and gas royalty production, 18% for water sales volumes, and 30% for produced water royalty volumes [5] Market Data and Key Metrics Changes - The Permian Basin experienced a decline in rig activity, with the horizontal rig count down approximately 26% [17] - Despite lower rig counts, production growth was sustained through a drawdown of drilled but uncompleted wells (DUCs), with an estimated 600 DUCs drawn down in 2025 [17][18] - The average lateral lengths of completed wells increased by 8% compared to the previous year, with new permitted wells averaging 35% longer than in 2024 [19] Company Strategy and Development Direction - The company is focused on leveraging its strengths in water and land access to build large-scale energy campuses, aiming for multiple multi-gig energy campuses [27][28] - TPL is investing in next-generation opportunities, including data centers and produced water desalination, with a strategic investment in Bolt Data & Energy [6][7] - The company plans to invest approximately $20 million in waste heat capture and data center cooling at its desalination facility [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth pipeline for 2026, focusing on maximizing long-term intrinsic value per share despite a weak oil price environment [12][11] - The company maintains a debt-free balance sheet and a $500 million undrawn credit facility, providing flexibility to invest opportunistically [12][21] - Management highlighted the importance of adapting to evolving market conditions and maintaining a resilient business model [22] Other Important Information - The company announced a regular dividend of $0.60 per share, representing a 12.5% increase from the previous quarter [16] - A shareholder event is scheduled for May 18th in Midland, Texas, to provide updates on company operations [13] Q&A Session Summary Question: Thoughts on power and data center development opportunities - Management noted that the opportunity set for power and data center development has evolved significantly, with ongoing commercial negotiations and promising projects [26][27] Question: Potential value from the Bolt Energy partnership - Management indicated that the water usage numbers for power generation and data centers could be substantial, depending on facility design [30][31] Question: Strength in traditional water business amid market contraction - Management attributed the strength in produced water volumes to legacy contracts and strategic implementation over the past few years [34][35] Question: Updates on desalination process efficiencies - Management confirmed that the goal is to reduce energy consumption in desalination, with waste heat capture being a key focus [45][46] Question: Exposure to rare earth exploration in Hudspeth County - Management acknowledged ongoing exploration projects in Hudspeth County, with promising early findings [48][49]

Climate Change Impact & Adaptation - Severe weather events are increasing, with 2024 being the hottest year on record and the National Weather Service issuing 3,000 flash flood warnings by mid-July [6] - Traditional engineering practices assuming stable past conditions are no longer valid due to climate change [10][11] - Adaptation to climate change is imperative, with a shift needed from shallow adaptation (e g, sandbags) to transformative adaptation [11][12][13] Transformative Adaptation Strategies - Transformative adaptation involves creating different physical spaces that collect floodwaters while providing habitat and open space [13] - Resilient Mystic is a plan that uses passive recreation areas for floodwater storage, green stormwater infrastructure, and elevated critical infrastructure [16][17] - Community involvement is crucial in developing resilience plans, shifting from expert-driven solutions to collaborative approaches [18][19] Economic & Policy Implications - Investing in resilience yields a resilience dividend, with multiple cumulative benefits accruing to communities for every dollar invested [20] - Resilience and adaptation require political will, funding, and policy, emphasizing the importance of electing leaders who understand the benefits of resilience [22][23] - Sharing experiences with climate change and promoting transformative adaptation can foster collaboration for a more resilient future [24]

Financial Data and Key Metrics Changes - For Q3 2025, the company reported consolidated total revenue of $203 million, with an adjusted EBITDA of $174 million, resulting in an adjusted EBITDA margin of 85% [16][17] - Free cash flow increased by 15% year-over-year to $123 million [17] Business Line Data and Key Metrics Changes - Oil and gas royalty production reached a record of approximately 36,300 barrels of oil equivalent per day, marking a 9% sequential increase and a 28% year-over-year increase [4][17] - Water sales revenue hit a record of $45 million, representing a 74% sequential growth and a 23% year-over-year growth [4] - Produced water royalty revenues amounted to $32 million, reflecting a 5% sequential growth and a 16% year-over-year increase [4] Market Data and Key Metrics Changes - The company noted that despite weak benchmark oil and gas prices, production volumes benefited from robust activity in specific subregions [5] - The average lateral lengths for wells year-to-date in 2025 are approximately 7% longer than last year and 23% longer compared to 2019 [5] Company Strategy and Development Direction - The company is focused on consolidating high-quality Permian assets, taking advantage of the current low commodity price environment to acquire additional royalties and surface acreage [9][14] - Investments in water infrastructure have established the company as a competitive player in the Permian, allowing it to maintain and grow market share [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand for oil, despite current low prices, citing structural declines in other shale basins [10][12] - The company believes it is well-positioned to capitalize on future price increases due to its strong cash flow margins and a robust balance sheet [13][16] Other Important Information - The company announced a three-for-one stock split of its common stock, expected to be completed in December 2025 [19] - The company closed on a $500 million credit facility, enhancing liquidity and providing flexibility for growth opportunities [12][20] Q&A Session Summary Question: What is a good run rate for the business, and how much of your water sales are recycled barrels versus water from source? - Management indicated that they are working to minimize volatility in water sales and are focused on maximizing recycled water usage [25][26] Question: Can you provide details on the royalty acquisition announced? - Management stated that the acquisition is expected to provide a strong growth outlook and is operated by well-capitalized operators [22][24] Question: How does the company view its position in the power and data center market? - Management expressed confidence in their position, noting that they have significant available land and are in discussions for potential opportunities [22][24] Question: What is the outlook for the water resources business? - Management acknowledged recent volatility but emphasized efforts to stabilize and maximize recycled water production [25][26] Question: How does the company characterize the competitive landscape in the Permian? - Management noted ongoing opportunities in the pipeline and expressed optimism about future acquisitions across various regions [30][31]