Texas Pacific Land Corporation

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

Thank you for joining us today for Texas Pacific Land Corporation's fourth quarter 2025 earnings conference call. Yesterday afternoon, the company released its financial results and filed its Form 10-K 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 forward-looking statements. Forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially 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 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, you 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, TPL's Chief Financial Officer, Chris Stedham, and Executive Vice President of Tech-Specific Water Resources, Robert Crane. The management will make some prepared comments, after which we will open the call for questions. Now I will turn the call over to Ty.

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 SLIM 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 this same span, TPL delivered three-year compounded annual growth rate for oil and gas royalty production of 17%, water sales volumes of 18%, and produce 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 counter-cyclical 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 produce water desalination. Starting with data centers, this past December, we announced a strategic investment into Bolt Data and 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 timelines 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 nearly in 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 Worla Phase II 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 costs 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 produce 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 oil and 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 OILA 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 full-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 is 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 18th. We welcome all shareholders to attend, and we ask that shareholders submit an RSVP by filling out a form on our website or emailing Investor Relations. Please visit the events section of our website for more information. And with that, I'll hand the call over to Chris.