Texas Pacific Land Corporation (TPL) | The Buildout — AI Infrastructure
The Verdict
Texas Pacific Land Corporation is a Texas land, royalty, and water company, principally in the Permian Basin. It earns royalties from oil and gas producers, sells water for well completions, and collects produced-water royalties. Its emerging NextGen effort applies the same land-and-water model to gas-fired power generation and data-center campuses, including produced-water desalination for cooling.
| Market Cap | — |
| Revenue (TTM) | $839M |
| Revenue Growth | +15.3% |
| EBITDA Margin (TTM) | 82.1% |
| Net Cash | $232M |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Q2 2026 set records for revenue, oil and gas royalty production, and produced-water royalty volumes; adjusted EBITDA margin was 88%.
- Unhedged royalty exposure: management says every $10/bbl change in oil realization is roughly $50M of annual revenue.
- Land position totals about 882,000 surface acres and 224,000 net royalty acres; the 10-K says the land segment has few direct peers.
- First NextGen deal is named: Chevron's Project Kilby in Reeves County, a multi-gigawatt power/data center development with a $43M land sale over 20 years plus a water-supply agreement.
- Orla Phase 2B desalination has completed construction and begun commissioning, with 10,000 bbl/d capacity and patented freeze desalination.
What We’re Watching
- Q2 line-of-sight wells fell to 18.4 net wells from 20.7 sequentially, with no explanation on the call.
- Water sales volumes fell 19% sequentially; recovery depends on new gas pipeline capacity improving Delaware gas differentials.
- Oil cut was in the mid-30% range, below management's stated 40% plus longer-term normalization.
- 25 GW is advanced conversations, not signed backlog; conversion timing is management's key near-term commitment.
The thesis is strengthening. Management delivered two previously disclosed milestones — the desalination facility reached commissioning and the anonymous first land/water deal was named Chevron/Project Kilby — while the base business set records. The open question is whether the 25 GW advanced-conversation pipeline converts into signed, revenue-bearing agreements.
Earnings
Q2 2026 revenue was $246 million, up 4% sequentially and 31% year over year. TPL does not report a cost-of-revenue or gross-margin line; adjusted EBITDA was $216 million at an 88% margin. Oil and gas royalty production reached a record 39,700 boe/d, and produced-water royalty volumes hit a record 4.9 million barrels per day.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $237M | $212M | $196M | +20.8% |
| Gross margin | 82.1% | 136.2% | 88.2% | -610bps |
| EBITDA | $196M | $171M | $162M | +21.2% |
| EPS | $2.07 | $1.79 | $1.75 | +18.4% |
| Line-of-sight wells (net) | 18.4 | 20.7 | n/a | — |
We are in advanced conversations with multiple hyperscalers, AI labs and power generators on 25 gigawatts of projects right now. I would be disappointed if we don't announce at least one or more major definitive agreements in the near term.— Tyler Glover, CEO, 2026-08-06
Management tone: Management's tone shifted from selective and guarded on the Q1 call — when it declined to name the first land/water counterparty — to execution-oriented and assertive on Q2, when it named Chevron/Project Kilby, disclosed the Shackelford/Jones acquisition, and quantified the 25 GW pipeline.
Management Guidance
Management reaffirmed FY2026 capital expenditures of $65–$75 million, with $29 million spent year-to-date through Q2. It gave no formal consolidated revenue, EBITDA, or production guidance; qualitative commentary points to a possible operator activity ramp if crude prices remain elevated and water-sales recovery as new gas pipeline capacity enters service.
Trajectory
Reported revenue accelerated — Q2 2026 grew 31% year over year, and Q1 2026 grew 20.8% year over year. The driver is record royalty production — oil and gas royalties at 39,700 boe/d and produced-water royalties at 4.9 million bbl/d in Q2 — while water sales volumes fell 19% sequentially on weak in-basin gas prices. Gross margin has compressed over the trailing quarters while operating margin is stable, and adjusted EBITDA margin reached 88% in Q2.
The Model
The model projects FY+1 revenue of $1,015 million and EBITDA of $845 million, an 83.3% margin. FY+2 projections step up to $1,184 million in revenue and $1,000 million in EBITDA, an 84.5% margin.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $798M | $1.0B | $1.2B |
| YoY Growth | — | +27.2% | +16.7% |
| EBITDA | $655M | $845M | $1.0B |
| EBITDA Margin | 82.0% | 83.3% | 84.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 7.9% above analyst consensus.
Management reaffirmed FY2026 capital expenditures of $65–$75 million, with $29 million spent year-to-date through Q2. It gave no formal consolidated revenue, EBITDA, or production guidance; qualitative commentary points to a possible operator activity ramp if crude prices remain elevated and water-sales recovery as new gas pipeline capacity enters service.
What Could Go Right — and Wrong
- A signed, named definitive agreement converts part of the 25 GW pipeline into contracted revenue.
- A named compute user or developer for Shackelford/Jones with defined land, water, and aggregate revenue streams.
- Orla desalination operates at or near 10,000 bbl/d with disclosed economics and commercial agreements for desalinated water, chip cooling, brine, or lithium.
- Oil cut normalizes to 40% plus and line-of-sight wells rebuild, confirming the royalty base re-accelerates.
- Delaware water-sales volumes recover as new gas pipeline capacity improves local differentials.
- The 25 GW pipeline fails to convert, or conversions slip well beyond the near-term commitment.
- Desalination ramp or economics disappoint, leaving the facility a demonstration asset without commercial contracts.
- Line-of-sight wells continue to decline, signaling lower future royalty production despite record current volumes.
- Water-sales weakness persists beyond the next few quarters because gas differentials do not improve as expected.
- A large unnamed customer reduces activity or the 39.6% concentration becomes a realized vulnerability.
Looking Ahead
The next twelve months hinge on management's near-term commitments: at least one major definitive agreement from the 25 GW advanced-conversation pipeline, a very-near-term Shackelford/Jones definitive agreement, and the Orla desalination ramp toward 10,000 bbl/d. Calendar 2026 also brings colocation and waste-heat capture studies at Orla, while new gas pipeline capacity over the next few quarters is expected to improve Delaware gas differentials and support water-sales recovery.
- Monday after Q2 callOrla desalination grand opening — Tests ramp toward 10,000 bbl/d and hyperscaler interest.
- Near term25 GW pipeline definitive agreement — Management expects at least one major agreement from advanced conversations.
- Very near termShackelford/Jones definitive agreement — Management would be very disappointed if not announced.
- Calendar 2026Orla colocation and waste-heat studies — Assesses chip-cooling and waste-heat recovery economics.
- Next few quartersDelaware gas pipeline capacity additions — Expected to improve gas differentials and recover water sales.
- Coming quartersOperator activity ramp — Possible if crude prices remain elevated.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $706M | $798M | $839M | +13.1% |
| Gross Margin | 90.8% | 99.3% | 97.7% | +853bps |
| EBITDA | $564M | $655M | $4.0B | +16.0% |
| EBITDA Margin | 80.0% | 82.0% | 82.1% | +207bps |
| Net Income | $454M | $481M | $504M | +6.0% |
| Free Cash Flow | $341M | $486M | $21.5B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)97.7%
- EBITDA Margin (TTM)82.1%
- Net Margin (TTM)60.0%
- ROIC37.3%
- FCF Conversion71.6%
- SBC / Revenue1.9%
The Company
Texas Pacific Land Corporation is one of the largest landowners in Texas, with approximately 882,000 surface acres and 224,000 net royalty acres, principally in the Permian Basin. It earns oil and gas royalties from producers, sells water for well completions, and collects produced-water royalties tied to disposal and pore space. That base business is now being extended through a NextGen effort aimed at data centers, gas-fired power generation, and produced-water desalination.
The company operates through two reported segments: Land and Resource Management, which includes royalties, easements, commercial leases, land sales, and material sales, and Water Services and Operations, run through Texas Pacific Water Resources LLC. It packages land, water, easements, and aggregate access across project lifecycles. In Q2 2026 it acquired over 10,000 acres in Shackelford and Jones County for about $100 million to extend that model beyond the Permian.
Business Segments
Competitive Landscape
The 10-K says the land segment has few direct peers, while any owner of comparable property is a potential competitor. In water, TPL competes with landowners, water supply and transfer companies, and produced-water treatment and sale companies. LandBridge is also active in Reeves County, where it signed a 3,400-acre PowerBridge data-center campus option.
- LandBridgeNamed as competitor and reciprocal agreement counterparty; LandBridge filing references reciprocal crossing rights and produced-water royalty/revenue sharing. It signed a 3,400-acre PowerBridge data-center campus option in Reeves County.
Supply Chain
TPL sits between Permian Basin producers and Texas power/data-center developers, supplying land, water, easements, and aggregate-linked income. Chevron, a named customer, did not name TPL in its own public comments; LandBridge is active in the same Reeves County market.
More on TPL: Earnings recap