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DATE

Thursday, Feb. 19, 2026 at 10:30 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Tyler Glover
  • President and Chief Operating Officer — Robert Crain
  • Chief Financial Officer — Chris Steddum
  • Vice President, Finance — Shawn Amini

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TAKEAWAYS

  • Oil and Gas Royalty Production -- Quarterly record set with 23% year-over-year growth, excluding the November royalty acquisition.
  • Water Sales Volumes -- Surpassed 1 million barrels per day for the first time, growing 36% year over year.
  • Produced Water Royalty Volumes -- Reached a quarterly record, increasing 22% year over year.
  • Annual Revenue, Net Income, and Free Cash Flow -- All-time highs achieved for the full fiscal year, with fiscal 2025 free cash flow of approximately $498 million, up 8% year over year.
  • 4Q 2025 Revenue -- Approximately $212 million reported.
  • 4Q 2025 Adjusted EBITDA -- $178 million, with an 84% adjusted EBITDA margin.
  • 4Q 2025 Free Cash Flow -- $119 million generated.
  • Dividend -- Quarterly dividend raised to $0.60 per share, a 12.5% increase over the previous quarter.
  • Capital Expenditures (2025) -- $66 million, at the low end of the originally communicated range and inclusive of $6 million in payables.
  • Balance Sheet -- Ended the year with $145 million in cash and 0 debt; $500 million credit facility remains undrawn.
  • Permian Basin Well Inventory -- 5.6 net permitted wells, 9.8 net DUCs, and 4.0 net completed but not producing wells, totaling 19.5 net line-of-sight wells, including 2 from the November royalty acquisition.
  • Rig Activity and Well Dynamics -- Cited a 26% year-over-year reduction in the Permian horizontal rig count, with production sustained by drawdowns in DUCs and longer well laterals (8% longer on Texas Pacific Land Corporation acreage, with new permits averaging 35% longer than in 2024).
  • Desalination Facility -- Orla Phase 2B, a 10,000 barrel-per-day R&D site, is nearing start-up, with operations expected in the next few months, and an adapted freeze desalination process aimed at reducing capital and operating costs.
  • 2026 Capital Allocation -- $65 million to $75 million in anticipated capital expenditures, with $20 million dedicated to evaluating waste heat capture and data center/power co-location potential at Orla.
  • Strategic Growth Initiatives -- Strategic investment in Bolt Data & Energy for large-scale data center and power development, with Texas Pacific Land Corporation holding a right of first refusal to supply water to Bolt projects.
  • Market Capture and Countercyclical Growth -- Achieved three-year CAGR of 17% in oil and gas royalty production, 18% in water sales, and 30% in produced water royalty volumes, despite oil prices declining from $95 to $65 per barrel between 2022 and 2025.

SUMMARY

The earnings call highlighted Texas Pacific Land Corporation (TPL 0.18%)'s ability to deliver record operating and financial metrics despite a lower commodity price environment. Management described material commercial progress in data center and desalination projects, emphasizing opportunities in West Texas for large-scale technology infrastructure. The $500 million undrawn credit facility and zero-debt balance sheet enable flexible capital deployment for both legacy business initiatives and next-generation growth areas.

  • Management confirmed ongoing advanced negotiations for multiple large-scale data infrastructure projects, with a stated expectation of "multiple new updates to share before the end of the year."
  • Bolt Data & Energy's ambitions, as referenced by a prominent investor, target a "10-gigawatt data center campus," with Tyler Glover stating, "with certain designs, yes, those numbers are very reasonable" regarding potential water revenue projections.
  • Chris Steddum reported a full-year royalty production of 34,600 barrels of oil equivalent per day, with the November acquisition contributing about 500 barrels daily.
  • The call introduced new well performance data, including over 100 new permits with laterals exceeding 15,000 feet and 34 permits over 20,000 feet in length.
  • Robert Crain stated, "We're never going to have a feedstock shortage of water usage for power gen or compute," reinforcing the scalability of the water business for new revenue streams.
  • Management indicated that commercial discussions for both data center and desalination use-cases have moved from conceptual to advanced planning stages, with an expressed expectation of near-term customer announcements.

INDUSTRY GLOSSARY

  • DUC (Drilled but Uncompleted Well): A well that has been drilled to total depth but has not yet undergone completion operations, such as hydraulic fracturing, and is not yet producing hydrocarbons.
  • SLEM (Surface Lease and Easement Management): Revenue earned through commercial leasing of surface land and associated property rights.
  • ROFR (Right of First Refusal): A contractual right allowing Texas Pacific Land Corporation to supply water before an external party can be selected for Bolt Data & Energy projects.
  • PDP (Proved Developed Producing well): An oil or gas well that is both developed and currently producing hydrocarbons.
  • CCGT (Combined Cycle Gas Turbine): An advanced power generation technology combining gas and steam turbines for greater efficiency, often needing significant water for cooling.
  • DSU (Drilling Spacing Unit): A contiguous acreage block designated for optimal development and spacing of oil and gas wells.

Full Conference Call Transcript

Tyler Glover: Good morning, everyone, and thank you for joining us today. Fourth quarter was an excellent finish to 2025 with quarterly records set for oil and gas royalty production, water sales volumes and produced water royalties. Excluding the contribution from our previously announced royalties acquisition from last November, our fourth quarter oil and gas royalty production grew 23% year-over-year. Water sales volumes this quarter exceeded 1 million barrels per day for the first time in our history, growing 36% year-over-year and produced water royalty volumes grew 22% year-over-year. For the full fiscal year 2025, we set annual records across our major operating milestones of oil and gas royalty production, water sales, produced water royalties and SLEM revenue.

We also delivered fiscal year records for consolidated metrics, including revenue, net income and free cash flow. Despite oil prices declining from $95 per barrel in 2022 to $65 per barrel in 2025, during the same span, TPL delivered 3-year compounded annual growth rate for oil and gas royalty production of 17%, water sales volumes of 18%, and produced water royalty volumes of 30%. We achieved this growth while maintaining a debt-free balance sheet and without any financing from new equity. We owe this countercyclical growth to our continued market capture, talented employees, commercial development focus, differentiated scale across royalties, land and water and self-funded acquisitions and investments.

Beyond this excellent performance from our core business, we also made tangible progress with next-generation opportunities in data centers and produced water desalination. Starting with data centers. This past December, we announced a strategic investment into Bolt Data & Energy, a new AI infrastructure platform chaired by former Google CEO, Eric Schmidt. Bolt seeks to develop large-scale solutions across data centers and power generation. We're excited to team up with Bolt. For TPL, we can provide unrivaled access to land, conventional and renewable energy and water. We can offer this in a state that maintains arguably the most pro-growth and pro-infrastructure regulatory environment.

Bolt is currently expanding its team and having productive conversations with potential customers, and our personnel have been evaluating future site selections across TPL land. As part of our agreement, TPL retains a right of first refusal to provide water to Bolt affiliated projects. We believe Bolt can become a large-scale, fully integrated data center and power generation platform, and we look forward to working closely together as we seek to make West Texas one of the premier technology infrastructure hubs. In addition to Bolt, TPL continues to engage in productive conversations with potential developers and customers for various projects. The data center landscape in the region is rapidly evolving and highly dynamic.

We're working on projects across the full extent of our acreage, both in-basin and out-of-basin. Project time lines, run the gamut as well, with developers viewing West Texas as a near-term priority for new developments, but also as a longer-term hub that can support large-scale expansions. Given the size of these developments, which can potentially represent tens of billions of dollars of total investment across GPUs and power generation, these projects require extensive due diligence and negotiations across numerous counterparties. Projects of this scale are always difficult, especially with West Texas as a relative data center newcomer. That said, versus even a few quarters ago, urgency from developers and customers has clearly increased.

Some of these conversations have progressed beyond just conceptual ideas and are in advanced stages of planning. We are encouraged by the progress we've made thus far, and we are hopeful to have multiple new updates to share before the end of the year. Turning to our desalination project. Our 10,000 barrel per day R&D desalination facility in Orla, Texas, which we refer to as Phase 2B, is nearing completion. We had originally expected this facility to commence operations by the end of 2025, and we now expect the facility to begin taking produced water in the coming months. During equipment testing and flowing through synthetic produced water, the engineering team experimented with an additional process beyond the original design.

After successful testing of new equipment to assess efficacy, we implemented the new process into our freeze desalination design and will be installing the associated equipment into our Orla Phase 2 facility. We believe this will substantially reduce the amount of time and cycles produced water needs to pass through the system, thereby providing substantial capital cost and operating expense savings for a commercial-scale facility. For TPL, desalination would provide another solution we can offer the industry in addition to our extensive in-basin and out-of-basin pore space. Permian already generates nearly 25 million barrels of produced water a day, with volumes expected to grow through the end of the decade even if oil production were to plateau.

To accommodate longer-term produced water growth, the industry will likely need incremental solutions beyond traditional subsurface disposal and desalination potentially provides a sustainable pathway to reduce the amount of water injected subsurface. For 2026, we look forward to commencing operations and ramping volumes on our Orla desalination facility, evaluating the potential to bring large-scale freeze desalination to the Permian. In addition, we plan to invest approximately $20 million on installing co-location equipment at the Orla facility to evaluate the feasibility of waste heat capture and data center cooling.

Waste heat capture could provide significant energy savings for our freeze process, while our outlet freshwater stream, after having gone through a freezing process, could provide direct cooling benefits for data centers and power generation. In conclusion, as we look ahead to 2026, we're excited with the growth pipeline in front of us. We are focused on exploiting our strengths and leveraging our expertise as we look to benefit from the long-term structural tailwinds unfolding across our business. We believe we can continue to drive growth and extract incremental value even as this relatively weak oil price environment persists. With our industry-leading margins, our fortress balance sheet, a $500 million undrawn credit facility.

Not only can we tolerate periods of low commodity prices, we have considerable capability to invest opportunistically as we look to consolidate high-quality assets and expand market capture. We remain steadfastly focused on maximizing long-term intrinsic value per share, and the opportunity set in front of us today across our legacy and next-gen businesses is as robust as ever. One additional housekeeping item I wanted to mention. Yesterday, we announced an event for TPL shareholders for an office and water field visit in Midland, Texas. That event will be held on Monday, May 18. We welcome all shareholders to attend, and we ask that shareholders submit an RSVP by filling out a form on our website or e-mailing Investor Relations.

Please visit the Events section of our website for more information. And with that, I'll hand the call over to Chris.

Chris Steddum: Thanks, Ty. Consolidated revenues during the fourth quarter of 2025 were approximately $212 million. Consolidated adjusted EBITDA was $178 million. Adjusted EBITDA margin was 84%, and free cash flow was $119 million. For full year 2025, we generated record free cash flow of approximately $498 million, which represents an 8% year-over-year increase. Full year performance benefited from higher daily oil and gas royalty production, which increased 29% year-over-year, higher water sales daily volumes, which increased 4% and higher produced water royalty daily volumes, which increased 25%. Of the approximately 34,600 barrels of oil equivalent per day for full year 2025 royalty production, the acquisition that closed last November contributed approximately 500 barrels of oil equivalent per day.

Consolidated results were partially offset by lower realized oil prices, which declined year-over-year by 15%. Given the strong performance, yesterday, we announced a regular dividend of $0.60 per share, which represents a 12.5% increase versus the prior quarter dividend. Capital expenditures last year were $66 million, which is inclusive of $6 million of payables. This was at the low end of our original guidance. Moving to our well inventory. As of quarter end, TPL had 5.6 net permitted wells, 9.8 net drilled but uncompleted wells, or commonly referred to as DUCs, and 4.0 net completed but not producing wells. That amounts to 19.5 net line-of-sight wells, which also includes approximately 2 net wells from our recent royalty acquisition.

Across the Permian Basin, sustained low oil and Waha natural gas prices during 2025 has generally led to a decline in rig activity, which according to Baker Hughes, Permian horizontal rig count is down approximately 26%. However, despite less rigs, the basin has been able to sustain production growth through a sizable drawdown in DUCs. The decline in our line of sight wells, and this is true basin-wide, is primarily due to this DUC drawdown. From our vantage point, we believe the industry will remain in DUC drawdown mode this year. During 2025, we estimate that the industry drew down approximately 600 DUCs, with roughly 3,500 to 4,000 DUCs still remaining in the Permian today.

With the current pacing of new completions, the industry will generally require around 2,000 DUCs to maintain a buffer in front of active frac fleets, leaving roughly 1,500 to 2,000 discretionary DUCs. Thus, we believe the Permian still has ample DUC inventory to drive a completion pacing to support production via continued discretionary DUC draws with at least a year or more of runway before the industry would need to begin adding rigs to bring new spuds and new completions into balance while maintaining current completion pacing. Another mitigating factor to lower rig counts is that operator efficiencies continue to improve and well laterals continue to get longer.

Wells completed on TPL royalty acreage were on average 8% longer than the prior year. We are seeing substantial increases in lateral lengths across the board. This was the first quarter in which new permits, spuds, completions and new PDP wells all had average lateral lengths in excess of 11,000 feet. For new permitted wells this past quarter, the average lateral length is 35% longer than the average permitted well in 2024. We also had over 100 new permitted wells with lateral lengths over 15,000 feet and 34 wells over 20,000 feet. Industry consolidation over the last few years is allowing operators to block up sections and create much larger DSUs.

With this trend of longer laterals, greater operator efficiencies and sizable DUC balance, we do not anticipate basin-wide production declines given the current oil strip. Turning to our capital allocation priorities for 2026. We exited the year with $145 million of cash on the balance sheet and 0 debt. During the quarter, we closed on TPL's inaugural credit facility with $500 million of commitments. That facility remains fully undrawn today. For fiscal year 2026, we anticipate capital expenditures to be approximately $65 million to $75 million. And as Ty mentioned, $20 million will be allocated towards investigating waste heat capture and data center and power generation co-location potential for our freeze desalination facility.

The remaining balance will be dedicated to our water sales business for electrification, equipment and supply improvement and maintenance. With modest capital needs, a business that continues to generate strong free cash flow and a balance sheet and a net cash position with a sizable undrawn facility, TPL has the flexibility and liquidity to respond to evolving macro and sector volatility. We retain the ability to simultaneously invest in the business, acquire high-quality assets and expand shareholder return of capital, and we can flex up any or multiple aspects of those options should any opportunities or dislocations occur.

We have a resilient business and a pristine balance sheet, and our focus remains on maximizing intrinsic value per share over the long term. And with that, operator, we will now take questions.

Operator: [Operator Instructions] Our first question comes from the line of Derrick Whitfield with Texas Capital.

Derrick Whitfield: Congrats on a strong financial and operational update. I'd like to start with AI macro. Based on the flurry of both power and AI announcements we've seen across West Texas over the last 6 months, I'd love to hear your thoughts on how the opportunity set for power and data center development has evolved for TPL and if it extends beyond what you've highlighted with Bolt Energy to date?

Tyler Glover: Yes, it definitely has. I think the further we dig into it, the bigger we think the opportunity is. We've got a few projects we're working on, some Bolt related, some not. But I think when you look at that business, just like any other business, at the end of the day, scale is what really matters. And there's not really anyone in Texas that offers scale like TPL does, whether that's land, access to gas or water. And I think long term we're trying to build a real business here. We're not trying to hodgepodge 200-meg facilities over the acreage footprint. The long-term goal is to build multiple multi-gig energy campuses, and that takes a little time.

But efforts have been very promising so far. And like I said, we've got a few deals we're working on, commercial negotiations are ongoing. So very excited about the opportunity set.

Derrick Whitfield: Perfect. And Ty, for my follow-up, I really wanted to focus more firmly on Bolt Energy and the potential of your strategic agreement as laid out by one of your prominent investors. And maybe just for the benefit of level setting the discussion, the investor believes Bolt's ambition is to build a 10-gigawatt data center campus in West Texas, and that each gigawatt could be worth over $125 million in water revenue for TPL, with power generating requiring over 120,000 barrels [ per day ] of less conditioned water and data center cooling requiring over 200,000 barrels per day of more conditioned water.

With the understanding that we're still kind of in the early stages of charting this out, I know Robert and team have made a great deal of advances in understanding waste heat capture and cooling to improve PUE efficiencies for data centers. All that being said, are these reasonable numbers when kind of thinking about the scale and the potential value that we have in front of us?

Tyler Glover: Well, what we've seen is it varies pretty greatly with the design of the facility, both on the power side and the data center side. But with certain designs, yes, those numbers are very reasonable. And we've talked to some power generators that the water usage numbers seem substantially higher than that. So for us, I mean, we're used to moving a lot of water. Fourth quarter, we moved over 1 million barrels of water a day. And we think that this could be pretty material to the water business over the long term. So again, I think the opportunity is pretty substantial. But the usage actually depends -- varies pretty widely depending on design of the facility.

Robert, I don't know if you have anything to add to that.

Robert Crain: Derrick, it's -- you know our stance on it. It's variation in design. Our goal is to, obviously, work with the customer on how do we implement the right volume and quality of water in that design. But as things start to evolve, I know it's specific for Bolt, but I think you have to look at just how that power plant is designed. Is it a single cycle? Is it a combined cycle? Is it using evaporative direct air cooling to offset those efficiency losses due to higher ambient air? Our goal is to work with the customer, facilitate their design from a water perspective. Again, we focus on the quality and the volume that's needed.

I think when we look at the amount of compute that's coming, I mean, you mentioned the 10 gigawatt goal from Bolt, we're confident in the amount of compute and associated gen that's going to be coming to the Permian that the effect on our water business is going to be significant.

Derrick Whitfield: Perfect. And maybe just one quick follow-up, if I could, and shifting really more to your traditional water business. You guys saw record volumes for both disposal and source water and really, for that matter, really strong implied source water realization per barrel for this quarter. Given the broader contraction in activity that we're seeing across the basin, could you speak to some of the things that TPL is actively doing to drive this strength in the business? And just your current outlook for each of these businesses? And the thing that we're kind of seeing occur right now with both is higher highs and higher lows. So any color you could provide would be helpful.

Robert Crain: Sure. I'll start on the produced water side. I mean if you look at our success and the growth of produced water volume, I think it's twofold. One, you go back to our legacy contracts, what we were able to really set up in the early days of ensuring the volumes and how we direct those volumes and work with operators and midstream companies to do it. But the second is the strategy that we implemented 4 or 5 years ago, looking at the constraints we knew that were going to come from produced water management, associated pore space was two things: out-of-basin pore space for short-term solutions and desal.

The result you're seeing in those higher numbers is a result of those legacy contracts and our strategy that we've implemented. We look at the produced water management space of -- we're the solutions provider, again, to the operators and the midstream company, I think you're seeing the result in the numbers. When you look at our source water business, the scale and scope of our system that we continue to expand on every year, as we see water demands go up due to cube development and trimul-fracs, we've always said the scale and scope of our business allows us to expand and capture more market.

We are -- we can bolt on and build on to that system to capture more where even if we see a slight contraction in overall activity level, we're able to touch so much more as we continue to expand.

Operator: Our next question comes from the line of Tim Rezvan with KeyBanc.

Timothy Rezvan: Derrick actually hit on some of my topics here but just wanted to kind of follow up again on the commentary on the data centers. Your shareholder put out some pretty impressive comments. So do you anticipate putting something out yourself on that opportunity set? Is there a time when you may feel comfortable doing that? Or do you think that your shareholders' commentary is sufficient as it created quite a stir and people are trying to kind of understand the opportunity set here?

Tyler Glover: I think eventually we'll put more information out. We've got pretty strict confidentiality agreements in place with all of our counterparties. And kind of like when we started the water business, keeping most of the commercial terms private, at least in the near term, we think is a competitive advantage for us. But yes, we do hope to put a stronger narrative out eventually with some additional information on the opportunity set.

Timothy Rezvan: Okay. Okay. I guess we'll stay tuned on that. And then if I could pivot to the desalination update. It sounds like there's sort of a change in process that you think creates more efficiencies. So just to be clear on that, this waste heat capture is the idea that it will sort of just improve the efficiency of the operation. And where I'm going with that is there's a debate in the marketplace about the power intensity to run that process. And in an area that's short electricity today, people are trying to understand kind of how feasible it would be to scale that.

So if you could just kind of talk through the efficiencies you're trying to capture and overall power intensity of that business, that would be helpful.

Robert Crain: Sure. The overall goal in water desal is to reduce energy consumption to overall reduce your price per barrel. If you look at how desal metrics are measured, it's really in your kilowatt per hour per barrel of water treated. So I'll touch first on our kind of adaptation of design. Again, that is trying to achieve that goal of process the water without having to put more energy consumption into it to bring that kilowatt per hour per barrel down. When you look at the power piece of all thermal technologies, you're right, they do require power. So that's where we go when you look at waste heat capture.

Again, anything we can do from a waste heat capture standpoint, waste heat is almost free energy. And so we look at one of the big benefits of desal combined with power generation, be it for compute or microgrids, or whatever the use may be. Again, it's just furthering, bringing that kilowatt per hour per barrel treated down.

Timothy Rezvan: Okay. We will stay tuned for an update on that. I appreciate that. And then if I could sneak one more question in. On the western part of your acreage position, you have meaningful acreage in Hudspeth County. There have been companies developing, exploring for rare earths out there. Could you discuss your exposure to that activity, maybe from any exploration or right-of-way occurring there? Any color there would be helpful?

Tyler Glover: Yes. So we do have a couple of exploration projects going on currently out there on some properties that we've actually purchased or traded for in the last 7 or 8 years. Early stages, but findings seem promising so far. So we'll be glad to update you as we have additional information.

Operator: Our next question comes from the line of Oliver Huang with Tudor, Pickering, Holt.

Hsu-Lei Huang: Just wanted to start out on the water side. As we think about the ROFR to supply water for the previously announced Bolt partnership, just any sort of color on if this is expected to be done through your source water network, treated desal water or a tiered combination? Just really trying to get a better understanding how the latter measures up to spec requirements of counterparties for a CCGT and for a data center.

Robert Crain: I would say both. Again, we go back to that variation in design of what's the water volume and quality is needed. I think when you look at Bolt and some of the other deals we work on, eventually, it's going to be a combination of both of the water sources. We love the produced water component that could be used in power gen. And combining desal with power gen and data center usage, there's some synergies there that are pretty amazing when you dig into them from waste heat capture, freeze technology.

Obviously, the desal and that water is a little bit more complicated to treat, and that's what we've been working on the last couple of years to do. But when you look at the water use and the produced water, really not being in the hydrologic cycle and being able to implement a produced water stream into power gen and compute water needs, it's really unique to oil and gas operations. Those conversations are progressing nicely. So again, I think it's going to probably be eventually a combination of both water sources.

Hsu-Lei Huang: Okay. Perfect. That's helpful. And maybe as we're just kind of thinking about potential scaling up whether it's 1 gig or multiple gigawatts, do you all have the capacity to ramp the treated water to the required volumes? Or is there a point where you all would be capped out? And just any sort of color in terms of how much capital it might take to build out to, call it, an incremental 250,000 a day of capacity?

Robert Crain: When you look at the -- if we look at it just from a feedstock point, Ty mentioned in the commentary, there's 25 million barrels a day in the Permian, in produced water aspect. We're never going to have a feedstock shortage of water usage for power gen or compute. I think when you look at actual facilities to get up to the scale that's going to feed it, again, we're going to have to look at what the eventual water needs are, any capital offset that we can get for power gen and compute to help offset the capital needs of a desal facility are going to help bring it to market.

I think it's too early to say, are you going to have a constraint to get there. Again, we're going to have to look at what the gen capacity is, what the water needs are, and then design around that and make sure there's an economic return for us to do it.

Hsu-Lei Huang: Okay. That makes sense. And if I could squeeze one more in, just on the Bolt agreement that you all have. I know it's still pretty early days, but any sort of updates you can provide with respect to just securing any sort of commercial partnerships and anchor customers to just get a better sense of facility size? And also just how should we expect revenues to start flowing through for the first data center project? Any sort of color on timing?

Tyler Glover: Well, I think you can find some public comments that Eric's made. His goal is to get to 1 gig pretty swiftly with kind of a 10-gig campus being the ultimate goal. I would say the conversations that he's having and the pace that he's moving are pretty swift. So hopefully, we're announcing some stuff at least this year, if not first half of the year, but that's the goal. I think for us, there's a land use component. Obviously, we've got the right of first refusal on the water, which we think could be substantial, and then the equity return on Bolt could be very material for our business.

And so I would just say Eric continues to build out his team. They're moving swiftly and having a lot of really good conversations. I mean the guy's got an unbelievable network of contacts in that space.

Operator: We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.

Shawn Amini: Thanks for joining, everyone. Have a good day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.