Texas Pacific Land Corp (TPL) Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered mixed but resilient results: total revenue of $187.5M, diluted EPS of $5.05, and net income of $116.1M; records in produced water royalties ($30.7M) and easements/SLEM ($36.2M) offset lower realized commodity prices and reduced water sales .
• Sequentially, revenue fell vs Q1 ($196.0M → $187.5M) driven by a $16.2M decline in oil & gas royalties and a $13.2M drop in water sales; offsets included an $18.0M increase in easements/SLEM as large pipeline projects crossed TPL acreage .
• Management highlighted industry-leading cash conversion with Adjusted EBITDA of $166.2M and free cash flow of $130.1M; Adjusted EBITDA margin cited at 89% despite weakest realizations since early 2021, underscoring structural advantages of the royalty/surface platform .
• Strategic update: construction began on the 10,000 bbl/d produced water desalination facility in Orla, TX, with estimated service date in late 2025; permit applications submitted for land application and environmental discharge—positioning desal/beneficial reuse as a multi-year growth vector .
• Governance/capital return: Board declared a $1.60 quarterly dividend payable September 16, 2025; additionally, dual listing on NYSE Texas announced on August 14, 2025 (post-quarter), supporting regional visibility and liquidity .

What Went Well and What Went Wrong

What Went Well

• Record produced water royalties ($30.7M) and record easements/SLEM revenue ($36.2M), driven by out-of-basin pore space strategy and pipeline easement activity: “quarterly revenue records achieved in both SLEM and produced water royalties” .
• Exceptional cash generation and margins: Adjusted EBITDA of $166.2M and free cash flow of $130.1M, with management reiterating an 89% Adjusted EBITDA margin in Q2 despite price headwinds .
• Operational progress on desalination: “broken ground on location in Orla, Texas… largest desalination facility in the Permian to date,” with permits submitted and anticipated intake by year-end—advancing long-term produced water solutions and potential industrial reuse (data center cooling, power generation, hydrogen) .

What Went Wrong

• Sequential revenue decline ($196.0M → $187.5M) and water sales down $13.2M QoQ, as lower commodity prices and customer deferments reduced activity; average realized price per Boe declined to $32.94 vs $41.58 in Q1 .
• Oil & gas royalty revenue fell $16.2M sequentially on weaker realizations (oil $63.99/bbl, gas $0.87/mcf) despite higher Boe/d; net income eased to $116.1M from $120.7M in Q1 .
• Macro/industry headwinds: management cited tariff uncertainty, OPEC decisions, and a ~20% decline in Permian horizontal oil-directed rigs vs 2023 peak as contributors to slumping prices and activity moderation .

Financial Results

Values marked with * retrieved from S&P Global.

Segment revenue breakdown:

Revenue components:

KPIs and operating metrics:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “TPL’s enormous footprint across royalties, surface, and water positions us to extract numerous sources of value from the Permian’s exceptional resource… record produced water royalty revenue reflects TPL’s unique position to deliver essential solutions and capture high-quality cash flows.” — CEO Tyler Glover .
• “Even with our direct and indirect commodity price exposure, TPL still efficiently converted revenues to cash flow with second quarter adjusted EBITDA margin of 89%.” — CEO Tyler Glover .
• “We expect installation [of the 10,000 bbl/d desalination unit] to take a few months, and we still anticipate the unit to begin taking produced water by year end.” — CEO Tyler Glover .
• “Today, TPL already touches and generates royalties on over 4,000,000 barrels per day of produced water… we are well positioned to capture a substantial amount of the produced water volume growth going forward.” — CEO Tyler Glover .
• “Slim [SLEM] revenues of $36,000,000 was a company record, which benefited from $20,000,000 of pipeline easements.” — CFO Chris Steddum .

Q&A Highlights

• H2 Water Outlook: Water sales were weaker in Q2 due to price-driven deferments and spatial variation; management expects Q3 to be strong with Q4 dependent on commodity prices .
• ARIS Acquisition by Western: Management views consolidation in water midstream positively, supporting the Delaware water thesis and creating opportunity for surface/pore space owners .
• Desal Cost Objectives & Industrial Synergies: Desal is “research and development at scale” with field testing; synergies with cogen power and data center cooling, waste heat capture, and multi-year pathway to commercial-scale beneficial reuse in 2028–2029 .
• Power Generation Prospects: Permian has all the ingredients (produced water, localized demand); announcements (e.g., Cotero) are “first of many,” with accelerating dialogues given regional power shortages .

Estimates Context

• Wall Street consensus (S&P Global) for EPS and revenue was unavailable for Q2 2025 (no consensus values returned; only actuals present); as a result, a formal “vs estimates” comparison cannot be provided [Values retrieved from S&P Global].
• Implication: Absent consensus, sell-side revisions likely focus on mix (record produced water royalties/SLEM vs weaker water sales) and margin durability amid price volatility, with attention to desal timeline change and Q3 activity recovery signals .

Key Takeaways for Investors

• Resilient cash generation with high margins despite price headwinds; Adjusted EBITDA $166.2M and FCF $130.1M support ongoing capital returns and optionality (buybacks, organic investments, asset acquisitions) .
• Secular produced water opportunity: >4M bbl/d royalty touchpoint and comprehensive solutions (in-basin, out-of-basin pore space, desal/beneficial reuse) anchor a multi-year growth thesis independent of short-term commodity price swings .
• Infrastructure buildout catalyst: Record SLEM supported by ~$20M pipeline easements; continued midstream expansion across TPL acreage likely sustains surface revenue momentum .
• Near-term revenue mix shift: Expect recovery in water sales during H2 as deferred completions return; monitor Q4 sensitivity to commodity prices per management commentary .
• Timeline update risk: Desal facility service date moved to late 2025; permits progressing—watch execution milestones and industrial offtake developments (power gen/data centers) .
• Macro sensitivity: Tariff/OPEC dynamics pressured realizations; yet higher Boe/d and diversified revenue streams mitigate earnings volatility; focus on rig/DUC trends and realized prices into Q3/Q4 .
• Capital return continuity: $1.60 quarterly dividend maintained; dual listing on NYSE Texas post-quarter adds visibility—assess potential liquidity impacts and investor base expansion .

Notes:

• 8-K 2.02 earnings press release for Q2 2025 was not located; TPL filed an Investor Presentation 8-K on August 6, 2025 instead [List result shows “Investor Presentation 8-K” on 2025-08-06; Document ID 9].
• All non-GAAP figures (Adjusted EBITDA, Free Cash Flow) are reconciled in company press releases .
• Values marked with * retrieved from S&P Global.