Texas Pacific Land Corporation

Greetings and welcome to the Texas Pacific Land Corporation first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question-answer session will follow the former presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this concert is being recorded. It is now my pleasure to introduce your host, Sean Amini, Investor Relations. Thank you. You may begin.

Thank you for joining us today for Texas Pacific Land Corporation's first quarter 2025 earnings conference call. Yesterday afternoon, the company released its financial results and filed its form 10Q 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 forelooking statements. Forelooking statements are subject to risk and uncertainties that may cause actual results to differ maturely 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. 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, Ty Glover, and TPL's Chief Financial Officer, Chris Stedham, and Executive Vice President of Texas Pacific Water Resources, Robert Crane. Management will make some prepared comments, after which we'll open the call for questions. Now, I will turn the call over to Ty.

Good morning, everyone, and thank you for joining us today. TPL's first quarter, 2025, marked a strong start to the year with quarterly records set in both oil and gas royalty production and water segment revenues. Oil and gas royalty production averaged approximately 31,100 barrels of oil equivalent per day, representing 7% growth sequential quarter-over-quarter and 25% growth year-over-year. This performance was driven by strong development activity in our northern Culberson, northern Reeves, and central Midland subregions led by operators including Chevron, BP, Devon, and Cotera. Water segment revenues totaled $69 million representing 3% sequential quarter-over-quarter growth and 11% growth year-over-year as our commercial efforts continue to yield robust volume gains in both water sales and produce water royalties. Given the evolving macroeconomic landscape and volatility in commodity markets, my prepared remarks today will focus on what we're seeing and hearing from our operator customers the natural business hedges, and the built-in growth TPL retains to withstand a potential oil price downturn. Beginning with our outlook on near-term activity. We have not yet seen a widespread downturn in activity as oil prices have weakened this year, although a few operators have recently announced intentions to drop rigs and frack spreads. Feedback from other operators is they are cautiously evaluating activity plans. If oil were to stay below $60 for a sustained period of time, then we would expect more meaningful activity declines to emerge in the back half of the year. Specific to TPL, our royalty acreage is predominantly operated by supermajors and large independents whose development plans, while not completely impervious to price declines, tend to exhibit more inertia than those of mid-cap independents and privates. We would expect overall Permian activity and production declines to be slower relative to other U.S. oil basins, and we believe TPL's net production will continue to outperform the basin overall, given our near-term well inventory and the broad resilience of our operators' activity plans. Our near-term well inventory remains robust with net permitted wells, net drilled but uncompleted wells, and net completed but not producing wells at levels above our historical averages. The total of these well categories represents the highest TPL is ever recorded. Of this specific set of wells, a total of approximately 18 net wells comes from an operator group consisting of Exxon, Chevron, Conoco, BP, Occidental, EOG, and Katerra.