텍사스 퍼시픽 랜드(TPL) 2026년 3분기 실적 콘퍼런스콜: 매출 및 생산량 사상 최고치 달성

핵심 요약

• 텍사스 퍼시픽 랜드 코퍼레이션(Texas Pacific Land Corporation)이 총매출, 순이익, 잉여현금흐름 모두에서 3개 분기 연속 사상 최고 실적을 기록했다고 발표했다. 2026년 3분기 매출은 전년 동기 대비 35%, 전분기 대비 11% 증가한 2억 7,300만 달러에 달했다.
• 조정 EBITDA는 전년 동기 대비 37% 증가한 2억 3,800만 달러를 기록해 조정 EBITDA 마진율 87%를 나타냈다. 잉여현금흐름은 39% 늘어난 1억 7,000만 달러를 기록했다.
• 로열티 원유 생산량은 일평균 1만 7,100배럴로 분기 기준 사상 최고치를 기록했으며, 총생산량 역시 일평균 4만 2,300석유환산배럴(BOE)로 최고치를 경신했다.
• 퍼미언 분지의 추가 파이프라인 수송 용량 확충으로 지역 내 병목 현상과 가격 차이가 완화됨에 따라, 천연가스 실현 가격은 2분기 1,000입방피트당 0.40달러에서 3분기 2.40달러로 개선됐다.
• 생산수 로열티 물량은 전분기 대비 14%, 전년 동기 대비 27% 증가한 일평균 550만 배럴로 사상 최고치를 기록했다. 용수 판매량은 일평균 67만 2,000배럴로 전분기와 대체로 비슷한 수준을 유지했다.
• TPL은 분기 말 기준 3억 7,000만 달러의 현금을 보유하고 부채는 전혀 없었으며, 5억 달러 규모의 신용공여한도는 전액 미인출 상태를 유지했다. 분기 종료 후에는 미들랜드 및 글래스콕 카운티에서 약 9,700에이커의 지표면 토지와 238순로열티에이커를 인수했다.

핵심 재무 데이터

사업 및 운영 실적

석유 및 천연가스 로열티

로열티 생산량은 TPL 보유 토지 전반에 걸친 지속적인 개발과 우호적인 원자재 실현 가격의 수혜를 입었다. 원유 생산량은 일평균 1만 7,100배럴에 달했고, 총생산량은 일평균 4만 2,300석유환산배럴로 증가해 두 부문 모두 분기 사상 최고치를 기록했다.

TPL은 전면 무헤지 기조를 유지하여 지속되는 중동 분쟁에 따른 유가 상승의 수혜를 온전히 누렸다. 경영진은 또한 퍼미언 분지의 가동 리그 수 증가와 사상 최대 수준의 신규 수평정 인허가 건수를 향후 사업 활동을 뒷받침하는 지표로 언급했다.

헨리 허브 가격이 비교적 보합세를 유지했음에도 불구하고, 천연가스 실현 가격은 2분기 1,000입방피트당 0.40달러에서 2.40달러로 상승했다. 경영진은 신규 파이프라인 수송 용량 증설로 와하 허브의 정체가 완화되고 베이시스 스프레드가 축소된 점을 이러한 개선 요인으로 꼽았다.

TPL은 분기 말 기준 순 16.8개의 가시권 유정을 보유했으며, 이는 순 허가 유정 5.7개, 순 미완결 시추 유정(DUC) 8.6개, 순 완결 후 미생산 유정 2.5개로 구성됐다. 운영사들이 신규 시추를 통한 재고 보충보다 빠른 속도로 DUC 및 완결 유정을 생산 유정으로 전환함에 따라 유정 재고는 감소했다.

지표면 임대, 지역권 및 자재

지표면 임대, 지역권 및 자재 부문 매출은 전분기 대비 53% 증가한 총 3,600만 달러를 기록했다. 이러한 성장은 TPL 보유 토지 전반에 걸친 천연가스, 천연가스액(NGL), 전력 및 유틸리티 인프라에서 비롯됐다.

경영진은 서부 텍사스가 산업, 제조, 전력 및 데이터센터 개발과 연계된 인프라 확장의 초기 단계에 머물러 있다고 밝혔다.

용수 사업

용수 판매량은 일평균 67만 2,000배럴로 2분기와 대체로 변동이 없었다. 경영진은 완결 작업의 가속화가 더뎠으며, 지역 가스 가격 약세로 인해 사업 중심지가 델라웨어 분지에서 미들랜드 분지로, 텍사스에서 뉴멕시코로 이동한 점도 영향을 미쳤다고 설명했다.

생산수 로열티 물량은 일평균 550만 배럴로 사상 최고치를 기록했다. 완결 작업 둔화로 인해 재활용 대신 처분이 필요한 생산수 물량이 증가했으며, 이는 지하 주입 처분을 위해 TPL 토지를 통과해 수송되는 물량을 뒷받침했다.

오를라 2b단계 담수화 시설에서는 합성 생산수 염수를 활용한 시운전이 이어졌다. 인접 초지 복원 부지 공사는 완료됐으며, TPL은 시운전 진행 상황에 따라 연말까지 유전 생산수를 해당 시설에 유입하기 시작할 것으로 예상하고 있다.

데이터센터 및 전력 인프라

TPL은 프로젝트 계획, 설계, 실사 및 부지 공사가 진척되었으나, 여러 프로젝트에 대한 상업적 계약은 여전히 협상 중이라고 밝혔다. 회사는 전력 및 데이터센터 프로젝트의 초기 서비스를 위한 용수 공급 및 처리 인프라 구축에 2027년 자본을 지출할 것으로 예상하고 있다.

경영진은 제안요청서(RFP)와 문의가 지속적으로 높은 수준을 보이고 있다고 보고했으나, 새로운 주요 상업적 계약을 발표하지는 않았다. TPL은 비음용수, 음용수 및 고사양 탈염수를 공급할 수 있도록 통합 용수 사업의 역량을 강화하고 있다.

경영진 전망

경영진은 인허가 건수 증가, 분지 내 리그 가동 수 증가, 한층 강화된 4분기 용수 완결 일정 등을 근거로 향후 몇 분기 동안 TPL의 기존 사업 전반이 더욱 호조를 보일 것으로 전망했다.

회사는 리그 가동 확대로 신규 시추가 늘어나 결국 DUC 소진세와 균형을 이룰 것으로 보고 있다. 경영진은 또한 공식적인 생산 가이던스가 아닌 현재 시점의 평가임을 전제로, 2027년에 퍼미언 분지의 원유 생산량이 또다시 최고치를 경신할 가능성이 점점 더 높아 보인다고 덧붙였다.

담수화 사업과 관련해 TPL은 연말까지 합성 염수에서 유전 생산수로 전환할 계획이다. 상업용 시설의 가동 시점과 규모는 업스트림 운영사 및 하이퍼스케일 데이터센터 고객사와의 논의 결과에 따라 결정될 예정이다.

리스크 및 주시 요인

• 텍사스 규제 당국은 대규모 부하 전력망 연계를 재검토하고, 해당 검토와 추가적인 환경적 고려사항이 마무리될 때까지 데이터센터 인허가를 일시 중단하라는 지침을 받았다. 경영진은 단기적으로 인허가 지연이 발생할 가능성이 있다고 보고 있다.
• 차기 텍사스 주지사의 구체적인 정책 기조는 아직 명확하지 않다. 그럼에도 TPL은 데이터센터 개발에 대한 주 정부의 전반적인 접근 방식이 전면 금지보다는 신중하고 절제된 기조를 유지할 것으로 예상하고 있다.
• 대기 배출 허가, 용수 가용성, 지역사회 소통, 교통, 소음 및 전력 가격 적정성 등은 서부 텍사스 데이터센터 프로젝트의 중요한 고려사항으로 남아 있다.
• 운영사들이 DUC와 완결 유정을 소진함에 따라 단기 유정 재고가 감소했다. 재고 보충은 리그 및 수압파쇄 설비의 지속적인 추가 투입 여부에 달려 있다.
• 델라웨어 분지와 미들랜드 분지 간, 그리고 텍사스와 뉴멕시코 간 작업 중심지의 이동은 TPL의 용수 매출 구성과 인프라 요구사항에 영향을 미칠 수 있다.

애널리스트 Q&A 주요 내용

애널리스트들은 텍사스주의 정치적 변화가 데이터센터 개발에 미칠 영향에 집중했다. 경영진은 인허가가 더 까다로워져 단기 프로젝트 일정에 영향을 줄 수 있음을 인정했다. 다만 한적한 입지, 풍부한 천연가스 자원, 비음용수 확보 가능성, 산업 개발에 대한 지역사회의 수용성 덕분에 서부 텍사스가 대규모 컴퓨팅 시설에 여전히 매우 적합하다고 주장했다.

핵심 사업과 관련해 경영진은 인허가 건수 증가, 리그 가동 수 증가, 견고해진 4분기 완결 일정을 사업 활동 개선의 증거로 제시했다. 아울러 TPL은 뉴멕시코와 미들랜드 분지에서 용수 처리 역량을 확장하는 한편, 향후 델라웨어 분지의 용수 물량 증가에 대비해 분지 외 폐기 및 담수화 옵션을 개발하고 있다.

담수화와 관련해 경영진은 다음 단계가 업스트림 운영사와 하이퍼스케일 고객사 양측의 상업적 수요에 달려 있다고 밝혔다. 검토 중인 잠재적 데이터센터 적용 분야로는 생산수 활용, 폐열 회수, 동결 기반 공정, 칩 직접 냉각 등이 있다.

실적 발표 콘퍼런스콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Greetings. Welcome to the Texas Pacific Land Corporation Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Shawn Amini, Vice President of Finance and Investor Relations at Texas Pacific Land Corporation. Thank you. Shawn, you may begin.

Shawn Amini

Thank you for joining us today for Texas Pacific Land Corporation's Third 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, which is available on the Investors section of the company's website at www.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 our recent SEC filings. During this call, we will also be discussing certain non-GAAP financial measures. More information about and reconciliations of these non-GAAP financial measures are contained in our earnings release for this quarter and our SEC filings.

Please also note, we may at times refer to our company by its stock ticker, TPL. This morning's conference call is hosted by TPL's President and Chief Executive Officer, Ty Glover; TPL'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. For the third consecutive quarter, TPL generated record quarterly total revenue, net income and free cash flow. These results were supported by continued strong development activity across our royalty acreage, supportive commodity price realizations, increased pipeline easement revenue and record produced water royalty volumes.

Starting with oil and gas royalties, oil production of 17,100 barrels per day and total daily production of 42,300 barrels of oil equivalent per day both represent quarterly records. Record production is notable given that oil entered this year below $60 per barrel and upstream operators collectively were dropping rigs.

Oil and gas royalty revenues have benefited from sustained high oil prices as conflict in the Middle East has persisted. We have been and continue to remain today completely unhedged, allowing us to realize the full upside to elevated oil prices. Over the last few months, we have seen an acceleration in Permian activity levels, which we believe will support strong growth for TPL in the basin overall.

Operators were initially cautious for the first part of 2026, unsure of how long the Middle East conflict and higher oil prices would last. In the third quarter of this year, rig counts inflected higher and new permits for horizontal wells set a basin record.

As oil prices have remained strong, we expect the outlook for near-term basin growth to strengthen. New natural gas pipeline capacity has helped to debottleneck the in-basin gas glut, which has alleviated negative prices at the Waha Hub and compressed local basis differentials to U.S. Gulf Coast markets.

TPL's natural gas price realizations improved from $0.40 per thousand cubic feet in the second quarter to $2.40 in the third quarter despite relatively flat benchmark Henry Hub pricing over the same period. The natural gas pipeline egress in the Permian expected to expand substantially in coming years. We're optimistic that prolonged periods of negative prices and wide basis for in-basin gas are behind us.

Our surface leases, easements and materials business, which we refer to as SLEM, had a great quarter with quarterly revenues of $36 million, a 53% sequential increase. Performance was driven by natural gas, natural gas liquids, electric and utility infrastructure growth across our land position.

We're still in the early stages of growth in West Texas for new infrastructure across industrial, manufacturing, power and data centers, and our massive land footprint is well positioned to benefit. We are also investing in additional surface-related opportunities to capture this industrial boom.

Turning to our water business. Water sales volumes were 672,000 barrels per day for the quarter, roughly flat sequentially. Completion activity in the Permian has been slow to ramp even as oil prices have stayed high. Due to weak in-basin gas pricing for most of this year, we've seen an intra-basin shift from the Delaware to Midland as well as an intra-Delaware shift from Texas to New Mexico. In response, we've been increasing our efforts to expand our reach into New Mexico and Midland Basin more broadly.

Our ability to procure produced water for recycling is a major factor that allows us to maintain a presence in New Mexico, especially given operator preferences to reduce disposal needs. Although our acreage is less concentrated in the Midland Basin, we leverage third-party disposal systems on and off our acreage to facilitate completion water sales.

Beyond some of these regional intra-basin dynamics, the near-term water sales outlook for the Permian overall is constructive. As noted, the Permian's record new permits and rising rig counts are leading indicators of higher completion activity and corresponding higher water demand. Produced water royalties had an excellent quarter with record revenue and volumes.

Volumes reached a record 5.5 million barrels per day, which represents growth of 14% sequentially and 27% year-over-year. The near-term and long-term fundamental backdrop for Permian produced water remains strong as activity levels and rising water-to-oil ratios support volume growth.

Recent performance has also been supported by an additional factor. As completion activity declined in the first half of this year, produced water that would otherwise have been recycled for completions instead requires injection into pore space. Thus, more volumes have to move across TPL land for injection into pore space directly on or adjacent to us. This dynamic creates a natural hedge for our water business. Periods of tepid demand for completion water can simultaneously provide tailwinds for our produced water royalties.

Turning to produced water desalination and beneficial reuse. We have made encouraging progress at our Orla Phase 2b facility during the quarter. Our adjacent grassland rehabilitation plot is complete and ready to receive water under our approved land application permit.

With respect to our Texas Pollutant Discharge Elimination System, or TPDES, permit, we hope to receive the final draft of the discharge permit from the TCEQ shortly. In August, we held an on-site grand opening ceremony, which hosted more than 150 guests from across the industry, local and state government, research community, major energy companies and hyperscalers.

Since then, our commissioning process continues, we are inletting increasing concentrations of synthetically produced water brine as we test and calibrate equipment, finalize various process integrations and develop standard operating procedures. Additionally, we are establishing the data collection framework that will allow longer-term efficiency tracking and optimization of the desalination process.

By the end of the year, we hope to flow field-produced water into the Orla facility. We also continue to work on designs related to data center and power generation specific research and development initiatives to further the co-location of produced water desalination facilities.

Turning to our data center efforts. We're working diligently on a number of projects throughout our land position, although commercial agreements are still being negotiated, a significant amount of diligence, project planning and design and site work has progressed.

Recent regulatory moratoriums and new incoming governor at the state level are a couple more things the industry will have to navigate. The outgoing Texas governor directed regulators and ERCOT to conduct a verification and audit for grid-connected projects in ERCOT's large load interconnection process.

Subsequently, the governor also directed the TCEQ to pause issuance of permits to data centers pending the ERCOT review and incorporating other incremental environmental items. And although it's still early, we believe the new incoming governor will take a similarly measured approach to data center development in the state.

With much of West Texas data center projects anticipated to be behind the meter and in relatively rural areas, it does reduce some complexity relative to grid-connected projects that have to undergo interconnection studies. Air permits, water and community engagement remain pertinent for projects and significant focus points for many developers.

It's worth noting that these elements were already major points of emphasis from developers preceding the governor directive and recent election. These actions to date add to the diligence checklist, but these are not viewed as a blanket ban.

Furthermore, and this is true regardless of who's in power, virtually every hyperscaler and AI lab customer we're working with has been extremely focused on minimizing environmental and affordability externalities while maximizing community benefit. This dynamic is largely why these deals take so long to finalize.

Economic terms are obviously important, but customers want to ensure these community issues are proactively resolved and ultimately a net benefit to the local population. In total, we have not sensed waning motivation from landowners, developers and customers to get hyperscale projects built.

As it stands today, we expect to spend capital next year on water-related distribution and treatment infrastructure to serve the initial in-service of power and data center projects. Developers of gigawatt scale infrastructure have spent a lot of time optimizing designs for the unique attributes of West Texas and the scope of these projects continues to evolve. We're collaborating closely with the developers on land, water and easements. For water, quality specification and quantity span across a wide gamut.

TPL's water business is vertically integrated and capable of providing high volumes of non-potable, potable and high-spec demineralized water. Inbounds for quotes and RFPs remain very high, and we've established commercial teams dedicated solely to data center and power customers. We don't have a new major announcement today, but the backlog is robust, and we're well positioned to bring multiple hyperscale projects to West Texas in the near term. And with that, I'll hand the call over to Chris.

Chris Steddum

Thanks, Ty. Consolidated revenues during the third quarter of 2026 were approximately $273 million. This was an all-time high, up 11% sequentially and 35% year-over-year. Consolidated adjusted EBITDA was $238 million, which was up 11% sequentially and 37% year-over-year.

Our adjusted EBITDA margin for the quarter was 87%. Free cash flow was $170 million, which was up 10% sequentially and 39% year-over-year. Net income was $167 million, or $2.42 per diluted share, up 38% year-over-year.

Moving to our well inventory. As of quarter end, TPL had 5.7 net permitted wells, 8.6 net drilled but uncompleted wells, commonly referred to as DUCs and 2.5 net completed, but not producing wells, which we refer to as CUPs. This amounts to 16.8 net line-of-sight wells. Well inventory has declined from recent levels. However, new wells placed on production still supported continued production growth for TPL.

As Ty noted, operators spent the first part of the year drawing down DUCs and CUPs to support strong levels of new wells placed on production. High oil prices incentivize this behavior. With the rigs largely declining, well inventory was converted to production faster than new spuds could replenish inventory. The same dynamic has played out basin-wide. The Permian is setting new highs for oil production, while DUC inventory is down from a year ago.

Over the long term, however, wells turned to sales are limited by how many wells operators spud and complete and DUC inventory is finite. We just started seeing rig additions in the third quarter, which should continue to rise through year-end. As rig counts rise and new spuds increase, the DUC drawdown will level off as new wells drilled and new wells placed on production come into balance.

Historically, sustained high oil prices lead operators to build DUCs and record new horizontal well permits in the third quarter suggest the Permian is currently on the same path. All that said, we're not concerned by the drop in near-term well inventory. DUCs and CUPs can naturally be replenished as rigs and frac spreads are added.

Despite entering 2026 with 5-handle oil, the Permian will once again set a new oil production record this year. And given the activity ramp we're now seeing, it's looking increasingly certain that 2027 will also be another record production year. From our vantage point, the Permian oil machine and by extension, TPL is not even close to slowing down.

Turning to our balance sheet. At quarter end, TPL had $370 million of cash and cash equivalents and no debt with our $500 million credit facility remaining undrawn. After quarter end, we acquired approximately 9,700 surface acres and 238 net royalty acres in Midland and Glasscock counties.

This acreage sits in a high-quality subregion within the Midland Basin and is checkerboarded with 4 legacy TPL sections. The acquired acreage currently generates cash flow from source and produced water, SLEM and mineral interest. The acquisition augments our Midland Basin footprint where we can apply our existing commercial capabilities and expand capture on and off ranch.

Post acquisition, we continue to maintain a pristine balance sheet. We have tremendous flexibility to create value for shareholders as this is an opportunity-rich environment across organic investment, bolt-ons and M&A. We can also opportunistically lean into buybacks given the recent volatility induced by midterms and perceived impacts on the energy and data center industries in Texas.

Meanwhile, current high oil prices augments our free cash flow profile, enabling us to efficiently recycle cash towards attractive growth opportunities or expanded return of capital to shareholders. We remain very focused and disciplined as we look to maximize long-term intrinsic value per share. And with that, operator, we will now take questions.

Operator

[Operator Instructions] Our first question is from Derrick Whitfield with Texas Capital.

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Derrick Whitfield

Congrats on a very strong quarter. I'd like to start with the market and political landscape given the impact it had on your stock yesterday. The Blue Wave and change in Texas Governor leadership is perceived to be a headwind to your business. As I think about it, any political or regulatory rebuke against data centers actually makes the case for what you're pursuing with Bolt even stronger, not weaker. A, is that a fair assessment? And b, if so, what's your greatest concern in the new political landscape?

Tyler Glover

Thanks, Derrick. I think that's a fair assessment. Did things get slightly more difficult in Texas? Yes, but they certainly haven't gotten any easier in any other states. So I think the political change, one, just makes us more bullish on West Texas for data centers and compute.

When you think about the concerns of the governor, those are the same concerns that we've been hearing from local communities that we've been talking to out there for the last 1.5 years. And so we've already started working to design these facilities to address those concerns like cheaper power, concerns around using municipal water, traffic and noise.

So I think the type of site that we are trying to build will become the blueprint for how you have to build these things in Texas. And I think the lack of population in West Texas, cheap gas, abundant water, brackish non-potable water, all makes West Texas just the place for large-scale compute to be built.

So again, we're just more bullish. Does it affect the timing of some of these projects in the near term? Yes. But I think it's a net positive for the long-term value proposition for TPL and West Texas more broadly. So look, I think will we have to figure out how to navigate this in the near term? Certainly. But again, I think it's a net positive for TPL and we're just more and more bullish as we go on the value proposition for power generation and compute in West Texas.

Derrick Whitfield

Terrific. And regarding the base business, just on the intra-basin and across basin moves you noted, could you -- I guess, how would you characterize from what you've seen today, how the production and water trajectories look over the next couple of quarters? I'm not asking for like a 2027 guide, but just with how you see the pieces that have moved to date, just how do you think that looks for the business, that base business?

Tyler Glover

Well, we've definitely seen an uptick in permitting. The overall basin rig count is climbing. The percentage of rigs on our acreage versus the basin has continued to climb. Our completion schedule on the water side is much more robust for the fourth quarter than it was third quarter. So I think the next couple of quarters are going to be much stronger kind of across our legacy business for TPL.

Robert Crain

I mean, when we look at that shift, we've seen this shift to Midland Basin coming for a while. I think it's got different characteristics and reasons why it occurred. I think water is probably one of them. And we start to see some -- over the last, let's say, years, some maybe spatial challenges in water handling. I think it just goes even further to say what we've started creating for solutions on the water side, out-of-basin disposal, desal. When we see this shift back to the Delaware, there's going to be higher water volumes to handle. We're putting the framework in place for how to handle that through additional out-of-basin capacity. What we know is going to be the eventual pivot to beneficial reuse and desal and be ready for this activity level when it returns to the Delaware.

Operator

Our next question is from Tim Rezvan with KeyBanc Capital Markets Inc.

Timothy Rezvan

Ty, I appreciated the prepared comments that it's been sort of a shoot first, ask questions later kind of response yesterday and today on the Blue Wave. I was curious, I think not a lot of people assumed Abbott would lose. Did you or anybody else in the organization have discussions with the incoming governor before to understand their positions and where I'm going. Is there any specificity that you can see on what might change either on permitting or developing or time lines? Just any insight would be helpful, if you have any.

Tyler Glover

I don't think we have any real clear insight on where things are going. I mean, I'll be honest, we were in the camp of thinking that Abbott would get reelected. But from what the new governor has put out so far, I mean, we don't expect the view on data centers in Texas and how those are developed to change too significantly.

Robert Crain

I'll say we're heavily engaged in Austin. Again, not saying that anybody saw this coming. But when we're engaged on the regulatory side and on the legislative side as well, I'll reiterate, I think, what Ty said in his first comments of our blueprint for what kind of functional data center and power gen build-out should be.

I completely agree that it strengthens the West Texas thesis. If we look at short-term what permitting is going to look like. Obviously, there's still the moratorium in place that Abbott put on. We're going to continue to work with the regulators to say, okay, what does that proper siting do? I think, again, it strengthens our thesis, probably some short-term headwinds just from a permitting standpoint.

But long term, I think it continues to, if you say, force to compute to the Permian because of the attributes. I think when you look at Permian, too, you have to look at now -- you're going to not just kind of those quantitative inputs of the commodities, the land and the water and the gas.

But I think you also have to look at just the community's acceptance and kind of qualitative acceptance that West Texas sees toward data centers. And if you look at the Permian, it's a more transient community. It's always been that work community. I think the community as a whole are starting to see compute as a way not only get another industry in, but continue to prop up what is West Texas in the upstream side of the world.

Timothy Rezvan

Okay. I appreciate the comments. I know we're about 36 hours into digesting all this, so thank you. As my follow-up, your slide deck had some cursory comments about next steps on the desalination progress. And I know time lines are hazy right now given everything that's happened this week.

But can you just talk about kind of what you would need to see to kind of -- you talked about 2027 and beyond procurement of equipment for a commercial scale facility. Maybe just talk about the next steps on desalination and given the progress to date.

Robert Crain

Sure. Right now, as Ty mentioned in the prepared remarks, commissioning continues. We -- the reason we do synthetic brines to start out, we're being very deliberate in our approach of the commissioning of the system. It's a very complex system with a lot of data sensors and inputs. And when we -- why we run synthetic brines is mainly from a characteristics and waste standpoint. So short term, by the end of the year, we pivot from synthetic brines over to actual produced water and let the system start to run.

When we think about next level initiatives and commercial interest, somewhat twofold. One, when we look at traditional just upstream offtake, a lot of interest from the operators, what does an offtake agreement look like. But then the second piece has been the increasing interest from the hyperscaler community. And for that, it's kind of twofold. We look at the research initiatives that we've talked about before, waste heat capture, possible implementation of our freeze and direct chip cooling. But kind of high level, just what does the use of produced water look like in a data center. Can you pivot back to an evaporative model?

So over the next couple of months, it's going to depend completely on commercial conversations on both those fronts from the upstream side and the hyperscaler side, what the scale-up look like and what does the ultimate use of that water and compute look like.

Timothy Rezvan

I appreciate that, Robert. I know it's still early days.

Operator

This now concludes our question-and-answer session. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.