Core Insights - Texas Pacific Land Corporation (TPL) reported record quarterly revenues and net income for the third quarter of 2025, driven by strong performance in its Water Services and Operations segment and oil and gas royalty production [5][6][7]. Financial Results for the Third Quarter of 2025 - Net income for Q3 2025 was $121.2 million, up from $116.1 million in Q2 2025 [6]. - Total revenues reached $203.1 million, compared to $187.5 million in Q2 2025, with increases in water sales ($19.0 million) and oil and gas royalty revenue ($13.7 million) [7]. - The company's share of production was 36.3 thousand Boe per day, an increase from 33.2 thousand Boe per day in Q2 2025, with an average realized price of $34.10 per Boe [7][24]. Financial Results for the Nine Months Ended September 30, 2025 - Net income for the nine months was $358.0 million, compared to $335.6 million for the same period in 2024 [10]. - Total revenues for the nine months were $586.6 million, up from $520.0 million in 2024, primarily due to increases in oil and gas royalty revenue ($38.6 million) and produced water royalties ($14.7 million) [11]. - The company's share of production was 33.6 thousand Boe per day for the nine months, compared to 26.0 thousand Boe per day in 2024 [11]. Operational Highlights - TPL executed a purchase agreement for approximately 17,306 net royalty acres in the Midland Basin for $505 million, which closed on November 3, 2025 [8][14]. - A new $500 million revolving credit facility was completed on October 23, 2025, with an interest rate based on the Secured Overnight Financing Rate (SOFR) plus 2.25% to 2.50% [13]. - The company began construction of a 10,000 barrel per day produced water desalination facility in Orla, Texas, expected to be operational by the end of 2025 [8]. Dividend and Stock Split - A quarterly cash dividend of $1.60 per share was declared on November 3, 2025, payable on December 15, 2025 [15]. - The Board approved a three-for-one stock split of TPL's common stock, expected to be completed in December 2025 [16].

Financial Data and Key Metrics Changes - The company reported a net income attributable to limited partners of $334 million and adjusted EBITDA of $618 million for Q2 2025, with an increase in adjusted gross margin by $18 million compared to Q1 2025 [20][21] - The adjusted gross margin for natural gas decreased by $0.02 per Mcf, while the adjusted gross margin for crude oil and NGLs decreased by $0.15 per barrel, both in line with prior expectations [15][16] - Free cash flow for Q2 2025 was $388 million, with cash flow from operating activities totaling $564 million [21] Business Line Data and Key Metrics Changes - Natural gas throughput increased by 3%, crude oil and NGLs throughput increased by 6%, and produced water throughput increased by 4% sequentially, primarily driven by new wells in the Delaware Basin [13][14] - The company expects portfolio-wide average throughput growth of mid-single digits for natural gas and produced water, and low-single digits for crude oil and NGLs for the remainder of 2025 [17][24] Market Data and Key Metrics Changes - The Delaware Basin continues to be the primary growth engine, with expectations of modest year-over-year increases in throughput across all product lines [17][18] - The company anticipates meaningful natural gas throughput growth from other assets, particularly in the Uinta Basin, starting in the second half of the year [19] Company Strategy and Development Direction - The company announced the acquisition of Arris Water Solutions, which is expected to enhance its footprint in the Delaware Basin and expand service offerings [6][9] - The sanctioning of a second train at the North Loving natural gas processing plant will increase capacity to 550 million cubic feet per day, supporting anticipated growth in natural gas and produced water volumes [11][12] - The company aims to maintain a disciplined capital allocation framework while focusing on organic growth and potential M&A opportunities [76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth outlook despite volatile market conditions, citing strong producer activity levels in the Delaware Basin [26][27] - The company remains committed to generating strong returns for unitholders and sustaining distribution growth, with a long-term distribution growth outlook in the mid-single digits [50][25] Other Important Information - The company has implemented initiatives to optimize operational processes, resulting in annual run rate cost savings of approximately $50 million [23] - The expected close date for the ARRIS acquisition is during Q4 2025, pending regulatory review and shareholder approval [22] Q&A Session Summary Question: Funding for ARRIS acquisition - Management explained the decision to finance the acquisition in a leverage-neutral manner to preserve balance sheet capacity and position for future growth opportunities [31][33] Question: Water business percentage of EBITDA - Management indicated that while water currently represents 16% of EBITDA, they are comfortable with a mix around 15-20% as the water business evolves into a clear midstream type of business [34] Question: Regulatory environment in New Mexico - Management expressed confidence in the regulatory environment in New Mexico and highlighted the benefits of moving water across state lines [38] Question: FID on North Loving II - Management noted that the decision to move forward with North Loving II was based on strong underlying contracts and expected volumes from producers [40][42] Question: Synergies from the ARRIS acquisition - Management stated that the $40 million in expected synergies are primarily related to G&A and typical public company consolidation synergies, with no revenue synergies counted yet [46][48] Question: Long-term plans for McNeil Ranch - Management views the McNeil Ranch as a long-term upside opportunity for pore space and surface use, with existing permits for water disposal already in place [56][58] Question: Capital allocation between organic growth and M&A - Management emphasized that organic growth opportunities are prioritized, but they remain open to M&A if it meets their strategic criteria [75][76]

Core Viewpoint - The U.S. stock market has been volatile in 2025, but Western Midstream Partners (WES) stands out with a robust 9.4% yield supported by a durable and inflation-resistant business model [1] Business Model - Western Midstream has a vast infrastructure across major oil and gas basins, including over 14,000 miles of pipeline, enabling it to process, transport, and store various energy products [3] - The company operates predominantly on a fee-based model, with approximately 95% of natural gas contracts and 100% of liquids contracts being fee-based, providing low exposure to commodity price fluctuations [4] Geopolitical Context - The ongoing geopolitical tensions, particularly the war in Ukraine, have led to a significant reduction in the EU's reliance on Russian pipeline gas, dropping from over 40% in 2021 to about 11% in 2024, while U.S. LNG exports to the EU surged from 26% in 2021 to 70% in the first half of 2025 [5] - Western Midstream's infrastructure in the Permian basin and Rocky Mountains positions it as a key player in the U.S. natural gas system, benefiting from these geopolitical shifts [6] Financial Performance - In Q1, Western Midstream reported $594 million in adjusted EBITDA and $399 million in free cash flow, with a cash balance of $2.4 billion and guidance for free cash flows between $1.275 billion and $1.475 billion for 2025 [7] - The company had a dividend coverage ratio of 1.6 times in Q1, indicating net income was 60% higher than dividends distributed, and it increased its quarterly dividend by 4% for 2025 [8] Business Expansion - Western Midstream completed its North Loving natural gas processing plant ahead of schedule, increasing processing capacity in West Texas by approximately 13% or 250 million cubic feet per day [10] - The company is also developing the Pathfinder pipeline, expected to transport 800,000 barrels per day of produced water, with a long-term agreement already in place with Occidental Petroleum, reducing execution risk [11] Valuation - Trading at an enterprise-value-to-EBITDA ratio of 9.8, Western Midstream appears discounted compared to peers, despite concerns over business concentration risk, as Occidental Petroleum accounted for nearly 60% of total revenues in 2024 [12] - The market may be overestimating the risks associated with Occidental, which is financially healthy and holds a 44.8% ownership stake in Western Midstream [12] Investment Appeal - Western Midstream offers a unique combination of a 9% yield, inflation protection, and exposure to a strong U.S. energy sector, making it an attractive investment option [13]

Financial Data and Key Metrics Changes - The company reported net income attributable to limited partners of $302 million and adjusted EBITDA of $594 million for Q1 2025 [15] - Adjusted gross margin decreased by $8 million compared to the previous quarter, primarily due to decreased throughput and the absence of favorable revenue recognition adjustments from the previous quarter [15][16] - Free cash flow for the first quarter was $399 million, with cash flow from operating activities totaling $531 million [17] Business Line Data and Key Metrics Changes - Natural gas throughput decreased by 2% sequentially, primarily due to lower volumes from the DJ Basin and Powder River Basin, partially offset by growth in South Texas and Utah [9] - Crude oil and NGL throughput decreased by 6% sequentially, with operated crude oil and NGLs throughput down by 3% [10] - Produced water throughput also decreased by 2% sequentially due to timing of wells coming online and increased recycling activity [10] Market Data and Key Metrics Changes - The Delaware Basin is expected to continue being the main engine of throughput growth in 2025, with modest year-over-year throughput increases anticipated for all product lines [12] - The company expects average year-over-year throughput growth of mid-single digits for natural gas and produced water, and low-single digits for crude oil and NGLs [12] Company Strategy and Development Direction - The company has completed the commissioning of the North Loving plant, increasing natural gas processing capacity by approximately 13% [5] - The company emphasizes prudent capital allocation and plans to maintain a strong balance sheet with net leverage at or below 3x, allowing for growth while increasing distributions [20] - The company is focused on organic growth projects backed by minimum volume commitments to ensure stability during commodity price fluctuations [19] Management's Comments on Operating Environment and Future Outlook - Management noted that the recent market volatility has not changed their strategy or priorities, and they remain optimistic about potential acquisition opportunities [24] - The company is closely monitoring customer activity and capital discipline in light of recent commodity price weakness, but has not adjusted its guidance [26][44] - Management expressed confidence in their ability to navigate various business environments due to a strong contract portfolio and engaged workforce [70] Other Important Information - The company declared a quarterly distribution of $0.91 per unit, representing a 4% increase over the prior quarter [17] - Bob Phillips, former CEO of Crestwood Equity Partners, has joined the board as an independent director, bringing significant midstream expertise [20] Q&A Session Summary Question: How will capital allocation change in a slower growth environment? - Management stated that their strategy remains unchanged, and they are prepared to take advantage of acquisition opportunities if organic growth slows [24] Question: What is the guidance for the second half of the year? - Management confirmed that they expect volumes to pick up, driven by West Texas and Uinta, with no material changes to their outlook [26] Question: Any updates on the PATHFINDER project contracts? - Management reported positive conversations with customers and midstream providers, seeking minimum volume commitments for the pipeline [32] Question: How recent are conversations with producer customers regarding CapEx cuts? - Management indicated that discussions are ongoing and real-time, with no significant changes in guidance despite some producers announcing CapEx cuts [41][44] Question: How will CapEx look if Permian production is flat? - Management suggested that CapEx would likely be at the low end of guidance if production remains flat, as they can adjust spending based on producer activity [66] Question: What are the priorities for return of capital and buybacks? - Management emphasized that capital allocation focuses on sustaining or growing distributions, with buybacks considered if returns on equity exceed growth opportunities [52]