Texas Pacific Land Corporation (TPL) Earnings

Management highlights

- Financial and Core Operating Results * TPL delivered record quarterly total revenue, net income, and free cash flow in Q2 2026, with strong growth across core oil and gas and produced water royalty operations. * An unhedged royalty position allowed full capture of gains from the ongoing strong oil price environment. - Strategic Land Acquisition for New Growth Initiatives * TPL acquired over 10,000 contiguous acres in Shackleford and Jones County, Texas for ~$100 million, expanding its data center and power generation development footprint beyond the Permian Basin. * The acquired land has attractive attributes including existing water resources, access to natural gas and grid infrastructure, established fiber, and proximity to a mid-sized city, fitting the needs of large-scale hyperscale data center and power projects. - Data Center and Power Generation Strategic Progress * TPL confirmed the previously announced land sale and water supply agreement for Project Kilby, a multi-gigawatt power facility Chevron is developing to support a hyperscale customer data center in Reeves County, Texas. This project validates the Permian Basin as an attractive hub for large-scale data center infrastructure. * TPL is progressing on multiple projects with high-quality hyperscalers and AI labs, including a joint effort with Bolt Beta and Energy, with 25 gigawatts of total projects in advanced discussion. Deal activity requires extensive cross-party diligence across multiple value streams including land, water, and aggregates. - Produced Water Desalination Milestone * Construction of the 10,000 barrel per day Phase 2B desalination facility in Orla, Texas is complete, and commissioning has commenced. The facility uses TPL's patented freeze desalination process, with exclusive equipment rights for oil and gas applications from a leading industrial cooling provider. * TPL is exploring additional value-generating opportunities from desalination operations: co-location with data centers to use chilled desalination output for chip cooling, waste heat recovery to reduce energy consumption, and valorization of output streams (high-spec fresh water for multiple commercial uses, concentrated brine for lithium and other valuable mineral extraction). Large energy, tech, and AI firms have expressed strong interest in these opportunities.

Guidance

- Management reaffirmed its full-year 2026 capital expenditure guidance of $65 million to $75 million; capital planned for co-location and desalination testing at the Orla Phase 2B facility was already embedded in the original guidance range. - Management expects oil mix in TPL's oil and gas production to trend back to a normalized long-term level of 40%+ after the Q2 2026 temporary dip to ~35%. - Management expects produced water royalty rates to stay steady or increase over the next one to two years, supported by built-in contract price escalators and rising pore space scarcity, with only minor expected pressure from shifts between transportation injection and in-field injection royalty mixes. - Management expects activity to shift back to the Delaware Basin over the next few quarters as new substantial gas pipeline capacity enters service and local natural gas price differentials improve, which will likely boost water sales volumes in the region.

Segment performance

Consolidated total revenue for Q2 2026 hit a quarterly record of $246 million, a 4% sequential increase and 31% year-over-year increase. Consolidated adjusted EBITDA was $216 million, up 19% sequentially and 30% year-over-year, with an 88% adjusted EBITDA margin. Free cash flow was $156 million, up 14% sequentially and 20% year-over-year. 1. Oil and Gas Royalties: Average royalty production reached 39,700 barrels of oil equivalent per day, up 7% sequentially and 20% year-over-year. This is the largest revenue segment for TPL, and its unhedged position allowed full benefit from the strong current oil price environment. As of quarter-end, TPL holds 18.4 net line-of-sight wells (5.6 net permitted, 9.5 net drilled but uncompleted, 3.4 net completed but not producing). Year-to-date 2026 capital expenditures totaled $29 million. 2. Water Resources: Produced water royalty volumes hit a record 4.9 million barrels per day, up 6% sequentially and 15% year-over-year, driven by high demand for TPL's pore space. Water sales volumes were 663,000 barrels per day, a 19% sequential decline (driven by weak Delaware Basin natural gas prices shifting operator development activity) but a 38% increase year-over-year. Revenue from SLIM (Surface Land and Infrastructure Management) was $24 million, up 37% sequentially, driven by strong performance from pipeline and wellbore easements.

Risks & headwinds

- Forward-looking statements regarding new growth initiatives (data center development, desalination commercialization, strategic acquisitions) are subject to risks and uncertainties that could cause actual results to differ materially from current expectations, including extended diligence timelines, failed deal execution, and changes in customer demand. - Weak in-basin Delaware Basin natural gas prices have recently reduced operator development activity in the region, leading to a sequential decline in water sales volumes in Q2 2026. - Large-scale new initiative development requires building new internal teams and capabilities, which carries execution risk.

Analyst Q&A

• Q: The 10,000-acre Shackleford and Jones County acquisition is a step outside TPL's legacy Permian footprint. How do you frame the opportunity and potential revenue streams for this land?

  A: West Texas' power and compute opportunity is far larger than TPL's existing legacy footprint. TPL completed over a year of due diligence on this property, which was already targeted by a pre-existing potential compute customer. The acquisition demonstrates TPL can source attractive high-value properties outside its legacy holdings, expanding its overall value proposition. TPL will pursue value across the full project life cycle (including land, water, and aggregates) while maintaining a capital-light approach, similar to its existing oil and gas business model.

• Q: How strong is interest from hyperscalers and AI labs in using desalinated produced water for data center cooling, leveraging the benefit that this water is not withdrawn from the existing hydrologic cycle?

  A: Interest is very high, spanning multiple use cases beyond just direct chip cooling. Produced water can replace traditional water sources for general evaporative and adiabatic data center cooling, helping operators meet water positivity or neutrality goals. TPL's unique freeze desalination process also supports direct chip cooling, as the technology already requires chilling water to far below temperatures needed for effective chip heat transfer, creating a natural operational synergy.

• Q: Should investors expect additional large land acquisitions like the Shackleford-Jones purchase going forward? How much of the power and compute opportunity can be delivered from TPL's existing footprint versus new acquisitions?

  A: TPL's primary focus is developing its existing acreage, but the power and compute opportunity extends far beyond TPL's legacy footprint, so the company will pursue attractive external opportunities to capture full value for shareholders, similar to how it built its produced water business. TPL currently has 25 gigawatts of power and compute projects in advanced discussion, and management expects to announce at least one or more major definitive agreements in the near term.

• Q: What is the reasoning for the lack of meaningful share buybacks recently, and how does this reflect TPL's current capital allocation priorities?

  A: There are currently many high-value growth opportunities across royalties, data center/power development, and desalination, so management is prioritizing deploying capital to these highest and best use opportunities and maintaining a cash build for these projects. Buybacks remain an option for future capital deployment if they become the most attractive use of capital at a later date, and are always under ongoing consideration.