Texas Pacific Land Corporation (TPL) Q3 2026 earnings review
Texas Pacific Land oil volumes jump, but well backlog shrinks
Texas Pacific Land Corporation, a major Texas landowner that collects oil royalties and sells water to drillers, set revenue and profit records even as oil prices cooled from last quarter. Third-quarter revenue rose 35% from a year ago to $273 million, while net income climbed 38% to $167 million. Chief executive Tyler Glover credited strong drilling and pipeline activity on the firm's land, which overcame a sharp drop in water sales.
| Revenue | $273.4M +34.6% from a year ago |
|---|---|
| Crude oil royalty volume | 1,578 MBbls +23.3% from last quarter |
| Backlog of future wells | 16.8 net wells -11.6% from a year ago |
| Quarterly dividend outlook | Unchanged $0.60 per share for Q4 |
⚖️ Verdict: 🟢 Bullish
The story got better because a surge in crude oil production proved the company can grow without relying on a spike in oil prices. Last quarter's volume growth came from cheap natural gas while oil shrank, so this quarter's 23% jump in crude barrels resolved that worry. Two cautions remain: the backlog of future wells shrank again, and average water prices dropped by nearly a third by our math.
The question now is whether drilling on the company's land will slow down as its backlog of unfinished wells shrinks. Either high oil prices will prompt operators to file new permits soon, or production growth will flatten out once drillers finish their current inventory. Next quarter's well permit count and water pricing will tell.
🐂 Bull Case
Crude Oil Volumes Rebounded and Lifted Royalty Sales
Texas Pacific Land Corporation collects royalties on oil and gas pumped from its land in Texas without paying for the drilling. Last quarter, total production grew only because of low-value natural gas, while crude oil volumes shrank. This quarter, chief executive Tyler Glover said the acreage "benefited from robust development activity, elevated oil prices, and improved gas realizations, driving record oil and gas royalty revenue."
Drill operators completed more oil-rich wells on the company's land during the third quarter. Total daily production rose 16.5% from a year ago to 42.3 thousand barrels of oil equivalent, a measure that combines oil and gas into a single volume.
- Crude oil royalty production: 1,578 thousand barrels, up 23.3% from last quarter and 22.9% from a year ago
- Crude oil share of total volume: 40.5% by our math, up from 35.4% last quarter
- Natural gas realized price: $2.40 per thousand cubic feet, up from $0.40 last quarter
This rebound matters because crude oil brings in three-quarters of the firm's royalty money. Last quarter's dip in oil share looked like a shift toward cheaper gas, so returning above 40% eases that worry for now.
What to watch: fourth-quarter crude oil production volumes. Another quarter above 1,500 thousand barrels would confirm that last quarter's drop was a one-time blip rather than a lasting shift toward gas.
Wastewater Fees Set a Record as Pipeline Deals Doubled
Beyond oil royalties, the landowner charges fees when operators lay pipelines across its surface or inject oilfield wastewater—known as produced water—underground. Both revenue streams grew this quarter, driving record revenue of $273.4 million, which was "primarily due to a $21.7 million increase in oil and gas royalty revenue, a $12.5 million increase in easements and other surface-related income."
Wastewater royalty volumes reached 5.5 million barrels a day, lifting fees 28.3% from a year ago to $41.4 million. Meanwhile, pipeline and surface easement income more than doubled from a year ago to $36.2 million. Because oil wells in the Delaware Basin pump out roughly four barrels of water for every barrel of oil, growing wastewater volumes give the business a steady income stream.
What to watch: wastewater royalty volumes in the fourth quarter. Staying above 5.5 million barrels a day would show that older wells keep generating fee-paying water even if new drilling slows down.
🐻 Bear Case
Oil Prices Pulled Back From Last Quarter's Highs
Texas Pacific Land does not use financial contracts to lock in oil prices, so market swings flow straight to its bottom line. That policy acts as a major benefit when crude prices climb, and this quarter's $83.57 per barrel still beat last year's $65.14 by 28.3%. However, the risk is that conflict-driven price spikes fade just as fast.
In the third quarter, the company's average realized oil price dropped 14.3% from last quarter's $97.55 per barrel. The firm still posted record oil royalty revenue of $125.9 million only because the 23.3% jump in oil volumes outweighed the price drop. By our math, at this quarter's production rate, every $10 drop in the price of a barrel of oil removes about $15 million of quarterly revenue.
What to watch: realized oil prices in the fourth quarter. A drop back toward last year's $60 to $65 range would cut quarterly royalty revenue by more than $30 million unless production jumps again.
The Backlog of Future Wells Shrank Again
To keep royalty production growing, drillers must keep permitting and drilling new wells on the company's land. Management tracks this near-term pipeline by counting permitted wells, drilled but uncompleted wells (DUCs), and completed wells waiting to start pumping. While chief executive Tyler Glover praised strong development activity on the acreage, the backlog of future wells shrank for a second straight quarter.
At the end of September, the pipeline held 16.8 net wells, down 8.7% from June and 11.6% from a year ago. Drilled but uncompleted wells fell from 9.5 to 8.6, and completed wells waiting to pump fell from 3.4 to 2.5. The company also gave no figure adjusting the backlog for longer horizontal well designs, which averaged 10,623 feet for new wells this quarter.
This matters because current record production is drawing down the inventory of unfinished wells faster than operators are adding new permits. When operators finish their backlog of drilled wells without replacing them, production growth eventually slows.
What to watch: net well permits and uncompleted wells in the fourth-quarter report. Another drop below 16.8 total wells would signal that higher oil prices are still not prompting drillers to expand their work.
Lower Water Prices Cut Segment Revenue
In addition to collecting passive royalties, Texas Pacific Land runs an active business that pumps and sells brackish and treated water to drillers for well completions. Unlike royalty fees, this operation carries direct operating costs and depends on local competition and completion schedules.
Third-quarter water sales revenue fell 28.4% from last quarter and 36.2% from a year ago to $28.4 million. The company said revenue fell "due to a decrease in average realized pricing, partially offset by an increase in water sales volumes." Daily volumes ticked up 1.4% from last quarter to 672 thousand barrels, so by our math the average price per barrel fell 30.1% from $0.66 to $0.46.
At the same time, water service operating expenses rose $2.2 million from last quarter to $13.8 million, expanding from 4.7% of total company revenue to 5.1% by our math. Because water prices fell while operating costs rose, net income in the water segment dropped 24.5% from last quarter to $33.6 million.
What to watch: implied revenue per barrel in the fourth quarter. A reading stuck near $0.46 would show that lower water pricing is a lasting shift in the mix of services rather than a one-quarter dip.
Risks this quarter didn't answer
Texas Pacific Land has pitched data centers, power plants, and wastewater desalination as its next growth engines, while also adding its largest shareholder to the board. Chief executive Tyler Glover said the team is "steadfastly working to advance those into meaningful commercial outcomes," so these standing risks remain open this quarter:
- Data-center agreements and water terms: the company spent another $12.5 million on land in the third quarter by our math (reaching $122.7 million this year), but announced no new deals beyond Chevron's Project Kilby and gave no water pricing or volume figures; a signed contract with revenue numbers is needed to prove the land buys will pay off.
- Wastewater desalination economics: the 10,000-barrel-a-day Orla Phase 2B test plant is still in commissioning with no operating cost or water-recovery figures in the release; operating data from the conference call or annual filing will test whether a 100,000-barrel commercial plant makes financial sense.
- Board influence and share buybacks: Horizon Kinetics co-chief executive Peter Doyle sits on the board and acquisitions committee while the company builds cash instead of buying back stock; the quarterly filing's share repurchase table will show whether buybacks stayed at zero.
💲 Other KPIs
Cash on the balance sheet jumped 48.7% from last quarter, adding $121.0 million after barely moving in the second quarter. The landowner carries no debt and generated $170.3 million in free cash flow, while paying out $41.4 million in quarterly dividends by our math.
Capital spending on water equipment and facilities fell 36.0% from last quarter's $21.9 million, taking up 5.1% of revenue by our math. Through the first nine months of the year, capital spending reached $43.2 million as construction wrapped up on the Orla desalination test facility.
The average number of diluted shares barely moved, rising 0.01% from a year ago and 0.003% from last quarter. The press release made no mention of share buybacks during the quarter, leaving share count flat while employee stock compensation added $4.2 million in non-cash expense.
🔮 Guidance
Unchanged. The board declared a regular quarterly cash dividend of $0.60 per share, payable on December 15, matching the payout from each of the first three quarters of 2026. The company does not publish revenue, production, or capital spending forecasts in its earnings releases.
❓ Key Questions
Why did average water sales prices drop 30% this quarter?
Water sales volume grew 1.4% from last quarter, but revenue fell 28.4% because average realized prices dropped from $0.66 to $0.46 per barrel by our math. Investors need to know if this reflects lower-priced recycled water mix or price cuts to win business.
Did well backlog grow after adjusting for longer horizontal wells?
The raw count of permitted and uncompleted wells fell 8.7% from last quarter to 16.8 net wells, the lowest level in over two years. In past quarters, management provided a figure adjusted for well length; its absence in the release leaves the true backlog unclear.
When will the new land purchases produce signed data-center contracts?
Total land acquisitions reached $122.7 million over the first nine months of 2026, up $12.5 million from June by our math, yet the release announced no new commercial agreements. Investors need a timeline and expected return on this out-of-basin spending.
What operating numbers is the Orla desalination plant showing?
The 10,000-barrel-a-day Orla test plant began commissioning last quarter, and the company plans a 100,000-barrel commercial facility next. Before committing that capital, management needs to share daily inlet volumes, energy use, and treatment cost per barrel.