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Operator: 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, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shawn Amini, VP of Finance and Investor Relations. Please go ahead.

Shawn Amini: Thank you for joining us today for Texas Pacific Land Corporation’s first quarter 2026 earnings conference call. Yesterday afternoon, the company released its financial results and filed its Form 10-Q with the Securities and Exchange Commission. It is available on the investor section of the company’s website at texaspacific.com. As a reminder, remarks made on today’s conference call may include forward-looking statements. Forward-looking statements are subject to risks 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 a 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 our stock ticker, TPL. This morning’s conference call is hosted by Texas Pacific Land Corporation’s Chief Executive Officer, Tyler Glover, and Texas Pacific Land Corporation’s Chief Financial Officer, Chris Steddum, and Executive Vice President of Texas Pacific Water Resources, Robert Crain. Management will make some prepared comments, after which we will open the call for questions. Now I will turn the call over to Ty.

Tyler Glover: Good morning, everyone, and thank you for joining us today. Texas Pacific Land Corporation’s first quarter 2026 marked a strong start to the year as Texas Pacific Land Corporation generated record quarterly total revenue, net income, and free cash flow. Oil and gas royalty production averaged approximately 37,001 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 are the second-best volume numbers in our history. And now, with crude oil prices spiking dramatically over the last few months, Texas Pacific Land Corporation 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 have only seen a marginal uptick in recent operator activity. Although oil prices at these current levels would generally stimulate a more robust response, there is 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 frac 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 Texas Pacific Land Corporation, 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. Today, with our unhedged commodity position, we are fully exposed to 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 NextGen 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-extract deal structure and terms from any one deal. Virtually all of our ongoing discussions and negotiations have substantially different makeups.

Every developer needs something different, and depending on where in the region a development is planned for, Texas Pacific Land Corporation 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, across parties, 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.

We are excited to get this first agreement, and we hope to provide updates on other significant opportunities as we progress throughout the year. On Texas Pacific Land Corporation’s produced water desalination efforts, our Phase 2B 10,000-barrel-per-day facility is nearly complete. The 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 towards a meaningful solution for the Permian’s growing produced water volumes. This test facility will allow us to evaluate whether produced water desalination can work economically at scale while also providing an opportunity to empirically demonstrate commercial potential for waste heat capture, cooling colocation, and utilization of outlet freshwater and concentrated brine streams.

Turning to our upcoming shareholder office and field tour visit in Midland on May 18, 2026, for those of you that have submitted an RSVP, you should have received an email a couple of 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 Stall’s passing. Most of you know Murray’s firm, Horizon Kinetics, along with its predecessors, has been Texas Pacific Land Corporation’s largest shareholder for many decades. Murray himself has been a tremendous longtime advocate for Texas Pacific Land Corporation. 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 potential of West Texas land, and as our commercial efforts expanded, Texas Pacific Land Corporation grew to become one of the largest publicly traded energy companies in the world. Through it all, as Texas Pacific Land Corporation’s share price began to reflect the immense value of our assets, Murray’s and Horizon Kinetics’ conviction and devotion to Texas Pacific Land Corporation 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 am 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 Texas Pacific Land Corporation to attain the full potential Murray envisioned. On behalf of Texas Pacific Land Corporation, I offer our condolences to Murray’s colleagues, friends, and family. And with that, I will hand over the call to Chris.

Chris Steddum: Thanks, Ty. Consolidated revenues during the first quarter of 2026 were approximately $237 million. This represents a quarterly all-time high as well as a 12% sequential increase and a 21% increase over last year’s first quarter. Consolidated adjusted EBITDA was $181 million, which was up 2% sequentially and 7% over last year. Free cash flow was $136 million, which was up 15% sequentially and up 8% over last year. The continued strong performance of our royalties position was primarily driven by strong completion activity in the Delaware Basin by Occidental, BP, and Devon in Loving and northern Reeves counties, and in the Midland Basin by Exxon in Martin County. With the high volatility and uncertainty related to global oil prices, I would like to provide some color regarding our commodity price sensitivities.

As Ty mentioned earlier, Texas Pacific Land Corporation remains fully unhedged. Using our royalty production volumes for fiscal year 2025 as an illustrative guide, roughly 5 million barrels of annual oil production means that every $10 per barrel increase in oil realizations would equate to approximately $50 million. Our oil price realization last year averaged $65 per barrel. For natural gas liquids, we received production volumes of roughly 3.8 million barrels, which means every $5 per barrel increase to our NGL realization would equate to an additional $17 million of annual revenue. Moving to our well inventory, as of quarter end, Texas Pacific Land Corporation had 5.8 net permitted wells, 9.6 net drilled but uncompleted wells, or commonly referred to as DUCs, and 5.2 net completed but not producing wells.

That amounts to 20.7 net line-of-sight wells, which represents a 6% sequential increase. We continue to see operators push longer laterals, with our new permits and new spuds both having an average lateral length in excess of 13,000 feet. On a net normalized basis, after factoring in longer lateral lengths, our line-of-sight inventory is up 11% sequentially. We continue to see strong permitting and drilling activity across our Delaware and Midland positions. And with that, operator, we will now take questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, please press star and 1 on your telephone keypad. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

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Operator: We will wait for a moment while we poll for questions. We will take the first question from the line of Derrick Whitfield from Texas Capital. Please go ahead.

Derrick Whitfield: Good morning, all, and congrats on a really strong quarter across the board. And also, Ty, thanks for your comments on Murray and Horizon, as I know many of your investors will appreciate that. Starting with, I guess, first, the land and water agreement with a gas power generation project. While I realize you may be limited in what you can say this morning, any color that you can paint around the kind of counterparty and scale of this development? It would seem to us it is safe to assume that it is not BOLT given the timeline of the development. And I would also love your thoughts on whether desalinated produced water could be part of the equation for the data center.

Tyler Glover: Thanks, Derrick. Not a whole lot that we can say beyond what we put in the release and what I said in the prepared remarks. But this project is not BOLT-related. We have several projects that we are working with BOLT on, but we also have several that are not BOLT-related. I cannot comment on the size or the counterparty. This is one that will likely use brackish water to start, but we are in talks around produced water and using desalinated water at some point on this project and others.

Derrick Whitfield: Great. And maybe just shifting back to the 30,000-foot level, it seems in your messaging that there is certainly a heightened urgency year over year among the hyperscalers. Could you help frame how that opportunity has changed and what it can mean for Texas Pacific Land Corporation really above and beyond today’s announcement?

Tyler Glover: I think speed to power has been the key to these projects all along. Substantially all of the grid power has been taken at this point, and I think a lot of these hyperscalers and developers are now focusing on behind-the-meter gas power generation. That makes a lot of our acreage more viable. And I think the water usage, when you are talking about a gas-fired power plant colocated with a data center, will be much higher. We see that as a net benefit, not only from a revenue standpoint, but also in unlocking additional acreage for Texas Pacific Land Corporation overall.

Operator: Thank you. We will take the next question from the line of Timothy Rezvan from KeyBanc Capital Markets. Please go ahead.

Timothy Rezvan: Good morning, folks, and thank you for taking our questions. There was not a lot of color on the desalination release. I appreciate your comments at the start of the call here. I was hoping to get a bigger picture overview of where you are going. You have given some parameters on OpEx and CapEx around a theoretical 100,000-barrel-per-day facility. So what exactly are you looking for as you start up this first facility to assess the feasibility of moving forward? And then, I know you need to take a first step before you take a second step, but how would you think about funding projects? I believe you talked about like a $100 million CapEx per 100,000-barrel-per-day facility. Are there discussions going on about a potential partner to help defray those costs? Thanks.

Robert Crain: Yeah, sure. This is Robert. Thanks for the question. I will start with what the goals of the facility are, and I think we have said them for a while. We call this research and development at scale. We knew the industry had to move from pilot phasing to something that we would call commercial sizing at the smallest scale, and from the industry perspective, that is usually 10,000 barrels a day. So strictly from a functional aspect, before we get into colocation, we want to see how this operates 24/7, day in and day out, at scale. That is really going to prove the economic viability strictly from an upstream market. Now, when we look at colocation, when you start combining these desal facilities with natural gas generation and waste heat capture colocation, yes, there is great benefit for the hyperscalers from a sustainability standpoint.

But also, we have to look at the colocation piece for everything we can do to lessen that upstream cost to the operator to make these commercial. We believe in desal strictly from a need from the upstream perspective, minus what we see for colocation benefit. To be determined on what commercial looks like—there are a lot of structures that we are evaluating. Some focus just on that upstream, and then the benefit of colocation as well.

Timothy Rezvan: Okay. I guess we will have to stay tuned throughout the year. And then, as my follow-up, touching on the legacy segments, we saw a step down in revenues in SLEM and in the Water segments from record high levels. If you strip out that one-time land revenue, it is almost flattish quarter over quarter. As we look at the trends here, would you say that 2025 was an upside aberration, or do you think the first quarter was a little bit low? And where I am going with this is, how should we think about the revenue trend across these legacy segments throughout this year, given the volatility in the last couple of quarters? Thanks.

Tyler Glover: I can touch on SLEM, but Robert can start with water.

Robert Crain: On water, when you look at Q4, for the produced segment you have some accrual noise in there. But really, when you look at produced, you have to look at it more as a three-quarter trend. When you start looking at that three-quarter trend, we think that is much more reflective of the contractual and functional nature of what we have been doing to drive volumes. We are still very bullish on the produced water space. You are going to see some noise in activity levels and movement of volumes. You are going to see some accrual noise. Again, when you look at that kind of three-quarter trend, that is where we see it, and we still see excitement in the produced water space.

Tyler Glover: And I would just add, on the SLEM front, I would not read too much into any single quarter. SLEM can get pretty lumpy. We may have a few big infrastructure projects hit within a quarter, and it was pretty strong last year with some of the gas pipe buildout that we were seeing. So again, I would not read too much into any one quarter on the SLEM front.

Operator: Thank you. We will take the next question from the line of Oliver Wong from TPH and Company. Please go ahead.

Oliver Wong: Good morning, Ty and team, and thanks for taking our questions. For my first question, I was wondering if there is any color on which direction the BOLT partnership is headed from a power generation source perspective. Would the initial phase be going down the path of a CCGT-type infrastructure, or are you thinking about something that could be more modular based? And for my second question, given all the conversations that you are having, looking out over the next five or so years, what do you think the total gigawatts deployed to data centers in the Permian might be, or asked another way, where do you see the TAM of the market potentially headed? And what type of market share could Texas Pacific Land Corporation grab given your land and water infrastructure footprint?

Tyler Glover: It is still a little early to tell. We are looking at both options on a couple of different projects, depending on end-user design. I would not rule either out. On the broader outlook, it is hard to say on a total Permian basis. For us, we feel like multiple multi-gigawatt energy campuses on our acreage are viable, and that is definitely the goal. We continue to be very pleased with our progress on that front and very excited about the opportunities.

Operator: Thank you. Ladies and gentlemen, with that, we conclude the question and answer session and also conclude today’s conference call of Texas Pacific Land Corporation. Thank you for your participation. You may now disconnect your line.

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