Texas Pacific Land's Q2 2026 revenue rose 31% to $246.1M and EPS to $2.23 as a $97.55 realized oil price lifted royalties 53%, while water revenue grew 39% on higher volumes.
Revenue
$246M
+31.2% YoY
Net income
$154M
+32.5% YoY
Diluted EPS
$2.23
+32.7% YoY
Operating margin
78.0%
Headline: a $97 oil quarter lifted royalty revenue 53%, while water kept growing regardless of price
Texas Pacific Land (TPL) reported second-quarter 2026 revenue of $246.1 million, up 31.2% from $187.5 million a year earlier, and net income of $153.9 million, up 32.5%. Diluted earnings per share rose to $2.23 from $1.68 (both figures adjusted for the three-for-one stock split TPL carried out in December 2025).
The main driver was the oil price, not a surge in drilling. The average price TPL realized on its oil royalties was $97.55 per barrel, up from $63.99 — a 52% jump that tracks the West Texas Intermediate benchmark ($95.65 vs. $64.57). The filing ties this to the military conflict in Iran that began in February 2026, which "caused major disruptions to the Strait of Hormuz" and pushed global oil prices "to over $90 per barrel from March through early-June." The oil volumes TPL received grew only 5.9%.
How TPL makes money
TPL is not an oil company in the usual sense. It owns large tracts of land and roughly 224,000 net royalty acres in the Permian Basin of West Texas, about 191,000 of which it has held since 1888. Its business has two parts:
Land and Resource Management (LRM) — mostly oil and gas royalties. A royalty is a fixed cut of the revenue from oil and gas pumped out from under TPL's land. Other companies (Chevron, Exxon, etc.) pay to drill and run the wells; TPL pays none of the drilling or operating costs and simply receives its share. The filing puts it plainly: the royalty interests "require no capital expenditures or operating expense burden from us for well development." That is why so much of each revenue dollar reaches profit. This segment also collects fees for pipelines and other uses of its land (easements).
Water Services and Operations (WSO) — selling fresh and treated water that drillers need to complete wells, plus produced-water royalties: fees TPL earns when the salty water that comes up alongside oil is transported across or disposed of on its land. These are fee-based and, per the filing, "not directly impacted by lower commodity prices."
Key figures
Metric
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Royalty production (thousand barrels of oil equivalent per day)
39.7
33.2
+19.6%
Realized oil price ($/barrel)
$97.55
$63.99
+52.4%
Realized price, all royalty volumes ($/Boe)
$42.17
$32.94
+28.0%
Water sales revenue
$39.7M
$25.6M
+55.3%
Produced water royalties
$37.1M
$30.7M
+20.6%
Free cash flow (company-defined, non-GAAP)
$155.5M
$130.1M
+19.6%
Operating margin is the share of revenue left after running the business, before interest and tax. "Boe" (barrel of oil equivalent) converts gas into oil-barrel terms so different products can be added up.
Takeaway: The 53% jump in oil and gas royalties is overwhelmingly a price effect. Holding last year's $63.99 oil price constant, this quarter's 1.28 million barrels would have brought in about $82 million of oil royalties instead of $119 million — so roughly $37 million of the $45 million oil-royalty increase came from price and only about $8 million from extra barrels. With the Permian rig count down 18% year on year, TPL's royalty line is now more exposed to where oil trades after the Hormuz disruption than to drilling growth.
Royalties: headline production growth is mostly low-value gas
TPL's share of total production rose 19.6% to 39.7 thousand Boe/day, but the mix matters:
Royalty stream
Q2 2026 volume
Q2 2025 volume
Volume change
Q2 2026 revenue
Q2 2025 revenue
Realized price 2026 vs 2025
Oil (thousand barrels)
1,280
1,209
+5.9%
$119.3M
$73.9M
$97.55 vs $63.99
Natural gas (million cubic feet)
7,161
5,659
+26.5%
$2.6M
$4.6M
$0.40 vs $0.87 per Mcf
NGLs (thousand barrels)
1,142
868
+31.6%
$23.7M
$16.5M
$22.44 vs $20.60
Oil produced 82% of royalty revenue on less than 36% of the volume. Gas volumes rose by a quarter, yet gas royalty revenue fell 43% because the local Waha Hub gas price averaged negative $2.92 per mmbtu in the quarter (vs. +$1.22 a year earlier). The filing attributes the Waha discount to "growing local Permian Basin natural gas production and limited natural gas pipeline takeaway capacity." In practical terms, Permian gas is currently worth almost nothing at the wellhead until more pipelines are built, so the gas-heavy part of TPL's volume growth adds little to revenue.
Water: the steadier engine
The water segment's revenue rose 39.2% to $82.2 million and its net income rose 50.5% to $44.5 million.
Water sales grew 55.3% to $39.7 million. The 10-Q attributes this to "an increase of 37.5% in water sales volumes and 13.0% in average realized pricing." Volumes averaged 663 thousand barrels/day vs. 482 thousand.
Produced water royalties rose 20.6% to $37.1 million, "principally due to a 14.7% increase in produced water volumes" (4.87 million barrels/day vs. 4.25 million). Because this is a per-barrel fee, it grows with the total amount of water the basin's existing wells bring up, not with oil prices.
Water service-related expenses rose $3.1 million to $11.6 million, which the filing links to the higher sales volumes.
This is the part of TPL that does not depend on $90 oil — though it still depends on operators continuing to complete new wells (for water sales) and on basin-wide production levels (for produced water).
What went the other way
Easements fell. LRM easements and other surface income dropped to $18.3 million from $33.5 million, "principally related to a decrease of $15.0 million in pipeline easements." Pipeline easements are lumpy one-time payments, so the prior-year quarter was a tough comparison; the filing calls this income "unpredictable."
Costs rose, but slower than revenue. Total operating expenses rose 23.9% to $54.2 million. Depreciation, depletion and amortization was up $2.9 million, driven in LRM by "depletion expense associated with royalty interests acquired during the second half of 2025." G&A rose to $8.0 million from $5.7 million, partly from higher rent and office costs.
Lower interest income. Other income fell to $2.9 million from $5.2 million on "lower cash balances and investment yields," and TPL now records a small interest expense ($1.0 million) tied to the $500 million credit facility it set up in Q4 2025, which remains undrawn.
Tax rate eased. The effective tax rate was about 20.5% vs. 22.0%, helped by TPL's purchase of transferable federal tax credits (up to $60.0 million of credits for $55.8 million, an estimated $4.2 million tax benefit).
Cash and capital allocation
Free cash flow (TPL's own non-GAAP measure: cash from the business after current taxes and equipment purchases) was $155.5 million, up 19.6% — slower than net income because purchases of fixed assets jumped to $21.9 million from $3.3 million as TPL finished its produced-water desalination facility and expanded water-sourcing assets. Through June 30, TPL has spent $55.8 million cumulatively on the desalination project; construction of the initial 10,000 barrel/day plant "is complete and commissioning has commenced."
Cash ended the quarter at $248.6 million, well below the roughly $700 million cash target above which management says it will send most free cash flow back to shareholders as special dividends or buybacks. TPL made no share repurchases in the first half, paid $83.2 million in dividends, spent $110.2 million acquiring land (including Shackelford and Jones Counties, tied to data center and power-generation plans), and declared a $0.60 quarterly dividend payable September 15, 2026 (vs. $0.53 a year ago, split-adjusted).
Year-to-date, revenue is $482.9 million (+25.9%) and net income $296.8 million (+25.4%); the first quarter included a one-off $20.9 million land sale to Chevron for its Project Kilby power plant and data-center development in Reeves County, which did not recur in Q2.
Outlook
The 10-Q gives no numerical earnings or production guidance. Management's stated view is that oil prices for the rest of 2026 are "uncertain and, in part, dependent on the duration of the conflict in Iran," and that operators are growing Permian output through "drilling and completion efficiencies" even as rig counts fall.
Our read:
Oil price is the swing factor. With oil at 82% of royalty revenue and volumes growing only mid-single digits, a return toward last year's ~$64 oil would cut roughly a third of this quarter's oil royalty income, all else equal. The quarter's growth should not be extrapolated as a volume trend.
Activity indicators are softening. The Permian's average horizontal rig count fell to 224 from 273, wells drilled per month fell to 462 from 495, and the stock of drilled-but-uncompleted wells (DUCs, a backlog of future completions) shrank to 3,872 from 4,428. Efficiency gains have so far offset this, but a smaller DUC backlog leaves less cushion for water sales and future royalty volumes if drilling stays low.
Gas upside depends on pipelines. TPL's gas and NGL volumes are growing fastest; if new takeaway capacity narrows the Waha discount, those volumes would start converting into meaningful revenue.
Water and new land uses diversify the story. Produced-water royalties and water sales are growing 20%+ with little direct oil-price exposure, and the Chevron Project Kilby deal and data-center-linked land purchases point to non-oil uses for TPL's acreage — still small next to royalties, but worth tracking.