Texas Pacific Land Corporation

Ladies and gentlemen, greetings and welcome to the Texas Pacific Land Corporation First Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sean Amini, VP of Finance and Investor Relations. Please go ahead.

Thank you for joining us today for Texas Pacific Lane Corporation's first quarter 2026 earnings conference call. Yesterday afternoon, the company released its financial results and filed this form. Thank you to 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 of different material 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 will 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 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. TPL's first quarter, 2026, marked a strong start to the year as TPL generated record quarterly total revenue, net income, and free cash flow. Oil and gas royalty production averaged approximately 37,100 barrels of oil equivalent per day, roughly flat sequentially, and up roughly 19% year-over-year. In our water segment, both water sales and produced water royalties had the second-best volume numbers in our history. And now, with crude oil prices spiking dramatically over the last few months, DPL is poised to benefit directly through our oil and gas royalties and indirectly through our diversified exposure across surface and water. Regarding the macro impact for the Permian Basin overall from our vantage point, we've only seen a marginal uptick in recent operator activity. Although oil prices at these current levels would generally stimulate a more robust producer response, there's still a lot of industry uncertainty around the duration of this oil supply shock. However, as this major supply disruption has persisted longer than initially anticipated, and given that global oil and product inventories are rapidly depleting, oil prices could very well remain elevated for quite some time even if the supply disruption were to be resolved in the near term. If so, we would expect the industry to ramp rig and frack spread activity over the coming quarters. With an immense unmatched amount of undeveloped well locations, the Permian could readily support robust volume growth so long as the price signal persists. For TPL, we have always viewed a strong balance sheet as our hedge against low commodity prices. despite declining oil prices over the last three years, we maintained a strong net cash position throughout and did not need to hedge to protect the balance sheet liabilities. Today, with our unhedged commodity position, we are fully capturing the direct upside from elevated oil prices. In addition to the upward trending momentum in our legacy oil and gas business, we have also made tangible progress with our next-gen endeavors. Starting with power generation and data centers, During the quarter, we entered into an agreement to sell a small section of land for $43 million, which is structured into annual payments over a 20-year period. We have entered into a separate commercial agreement to supply water for this same development. Given the broader commercial details for the project are still being finalized, we are currently limited in providing additional details. We hope to provide additional information in the coming months. Speaking more broadly about our efforts on this front, our commercial activities continue to pick up speed. Virtually every major hyperscaler and AI lab are evaluating large-scale plans in Texas, and our sense is that urgency to lock up power and compute continues to rise. I would add that it is important to not over-extraculate deal structure and terms from any one deal. Virtually all of our ongoing discussions and negotiations have substantially different makeup. Every developer needs something different, and depending on where in the region a development is planned for, PPL has varying capabilities for capturing commercial opportunities. For some deals, the land piece will be the primary value driver. For other deals, it may be water or aggregates. Given our scale, our unique capabilities across surface, water, and energy, and our relationships across multiple industries, we have significant flexibility to solve problems for developers. These projects often represent tens of billions of dollars of capital, so naturally alignment across parties and final investment decisions will take time to unfold. It is clear to me that Texas will become a dominant global hub for large-scale power and compute over the short, medium, and long term, and we're excited to get this first agreement. We hope to provide updates on other significant opportunities as we progress throughout the year. On TPL's produce water desalination efforts, our Phase 2b 10,000 barrel per day facility is nearly complete. A refrigeration inspection is planned for later this month, and we expect to begin flowing inlet water barrels in the coming weeks. This project represents a pathway toward the meaningful additional solution for Permia's growing produce water volumes. This test facility will allow us to evaluate whether produce water desalination can work economically at scale while also providing an opportunity to empirically demonstrate commercial potential for waste heat capture, cooling co-location, and utilization of outlet freshwater and concentrated brine streams. Turning to our upcoming shareholder office and field tour visit in Midland on May 18th, for those of you that have submitted an RSVP, you should have received an email a couple weeks ago with event details and a schedule. If you have not received that email, please reach out to Investor Relations. We look forward to hosting and seeing everyone in Midland. On a final note, I wanted to comment on Murray Stahl's passing. Most of you know Murray's firm, Horizon Kinetics, along with its predecessors, has been TPL's largest shareholder for many decades. Murray himself has been a tremendous longtime advocate for TPL. He believed in the company while it was still a thinly traded, little-known trust that owned royalties and surface in West Texas. Murray understood the virtues of real property combined with patience, and he was a rare combination of an independent thinker and dedicated practitioner. Over the years, as horizontal drilling and fracking began to unlock the latent value of West Texas land and as our commercial efforts expanded, TPL grew to become one of the largest publicly traded energy companies in the world. Through it all, as TPL's share price began to reflect the immense value of our assets, Murray's and Horizon Kinetics conviction and devotion to PPL remained unrivaled. While other shareholders would come and go as our share price rose and fell, Murray and Horizon steadfastly remained our largest owner and our biggest fan. Despite these recent tragic events, I'm confident that Murray's legacy will live on. Over the years, we have also gotten to know many of Murray's colleagues at Horizon Kinetics who share his principles and investment philosophy. It is plainly obvious how much Murray is revered and respected by his colleagues. We continue to maintain a close relationship with Horizon Kinetics, and we believe that our combined ongoing stewardship will allow TPL to attain the full potential Murray envisioned. On behalf of TPL, I offer our condolences to Murray's colleagues, friends, and family. And with that, I will hand over the call to Chris.