Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 5, 2026 · Beat 2 of last 6 quarters
The Buildout is a website built on agentic AI tools, currently in beta, and could have factual errors.
TPL's record results and aggressive expansion into data center and power generation infrastructure underscore the Permian's emergence as a major hub for AI compute. The Chevron Project Kilby deal and the Shackelford/Jones County land acquisition signal that TPL is positioning itself to capture value across the AI infrastructure value chain, from land and water to power. The commissioning of the desalination facility also highlights the potential for produced water to support data center cooling, a key constraint for AI infrastructure in water-scarce regions.
Q2 2026 was a record quarter for TPL, with total revenue, net income, and free cash flow all at all-time highs. Oil and gas royalty production averaged 39,700 boe/d, up 20% YoY, while produced water royalty volumes hit a record 4.9M bbl/d. Water sales volumes declined 19% sequentially due to weak in-basin gas prices, but management expects a recovery as new pipeline capacity comes online. The company disclosed that its previously announced land sale and water supply agreement was for Project Kilby, a Chevron-led multi-gigawatt power and data center development in Reeves County. TPL also acquired over 10,000 acres in Shackelford and Jones County for ~$100M to expand its data center footprint beyond the Permian. The Orla desalination facility (Phase 2b) is now complete and in commissioning, with a grand opening planned for the following Monday.
Management reaffirmed FY2026 CapEx guidance of $65M-$75M, which includes second-half spending on colocation cooling and waste heat capture at the Orla desalination facility. They expect water sales volumes to recover as new gas pipeline capacity comes online and improves in-basin gas price differentials, shifting development back toward the Delaware Basin. On the data center front, management is in advanced conversations on 25 GW of projects and expects to announce at least one major definitive agreement in the near term, including a potential deal tied to the Shackelford/Jones County land acquisition. They also expect oil cut to trend back up to 40%+ over time as accounting noise and gas-rich development normalize. Capital allocation remains focused on building cash for high-return opportunities, with buybacks still on the table but not a near-term priority.
“We will be able to provide more specific details as our commercial efforts turn into executed agreements.”
on Data center and power generation progress
“Our desalination effort leverages our patented freeze desalination process where we also have equipment exclusivity for oil and gas applications with one of the country's leading providers of industrial scale process cooling solutions.”
on Desalination technology
“The interest we're seeing not just from the operators, we'll be attending legislators, regulators, but also multiple hyperscalers that will be on site with us on Monday as we commission the facility.”
on Desalination facility commissioning
How would you frame the opportunity with the Shackelford and Jones County acquisitions and the amount of revenue streams it could involve?
Ty Glover explained that the power and compute opportunity in West Texas is broader than the Permian, and the acquisition was driven by a compute user they've been working with for over a year. They aim to capture value across land, water, and aggregates, similar to their oil and gas business, while remaining capital-light. They believe they can replicate this model.
Should we expect more sizable acquisitions like Shackelford/Jones County, and how much of the opportunity can you leverage off your existing footprint?
Ty Glover said they are looking at both developing existing resources and acquiring new ones, similar to how they built the water business. He noted they are in advanced conversations on 25 GW of projects and would be disappointed if they don't announce at least one major definitive agreement in the near term.
How does the lack of buybacks reflect your view of the equity valuation, and is it to build capital for other opportunities?
Chris Steddum said they are focused on deploying capital to the best and highest use, and with many opportunities like the Shackelford acquisition, they are in cash-build mode. Buybacks remain on the table but are not a near-term priority given the current opportunity set.