TPL Q2 2026 earnings: Oil royalties drive record revenue and free cash flow

Texas Pacific Land Corporation (NYSE: TPL) reported Q2 2026 revenue of $246.1 million, up about 3.9% from Q1, while diluted EPS increased to $2.23 from $2.07. For the quarter ended June 30, net income reached a record $153.9 million and free cash flow reached a record $155.5 million. Higher oil and gas royalty revenue more than offset lower water sales and the absence of Q1 land-sale revenue.

Core Earnings Data

TPL’s top-line growth was moderate sequentially, but earnings grew faster because total operating expenses remained nearly unchanged at $54.2 million. Water service-related expenses declined by $2.7 million, largely offsetting a $2.6 million increase in depreciation, depletion and amortization.

The release did not provide standalone Q2 2025 comparisons, so the quarterly figures below are compared with Q1 2026.

Adjusted EBITDA and free cash flow are non-GAAP measures. For the first six months of 2026, revenue increased about 25.9% year over year to $482.9 million, while net income rose about 25.4% to $296.8 million; these six-month comparisons should not be treated as standalone Q2 growth rates.

Business and Segment Performance

Land and Resource Management produced the stronger sequential revenue growth, supported by higher oil and gas royalties and surface-related income. Water Services and Operations recorded slightly lower revenue, but its operating income improved as expenses declined.

Oil and gas royalty production reached a record 39.7 thousand Boe per day, up from 37.1 thousand Boe per day in Q1. The average realized price increased to $42.17 per Boe from $37.06, helping oil and gas royalty revenue rise about 23.2% to $145.6 million.

Water operations were mixed. Water sales volume declined about 18.2% sequentially to 60.3 million barrels, reducing water sales revenue to $39.7 million from $46.9 million despite higher realized pricing. Produced water royalty volume, however, increased about 7.0% to 443.3 million barrels, and related revenue rose to a record $37.1 million.

As of June 30, TPL reported 131.9 net producing wells. Its identified royalty inventory also included an estimated 5.6 net permits, 9.5 net drilled but uncompleted wells and 3.4 net completed but not producing wells.

Higher Oil Royalties Outweighed Water Sales and Land-Sale Drag

Oil and gas royalty revenue increased by $27.4 million from Q1, reflecting both higher production and stronger realized pricing. Oil was the main contributor: oil royalty revenue rose to $119.3 million from $90.6 million as the realized oil price climbed to $97.55 per barrel from $70.57.

That increase was partly offset by weaker natural gas pricing. Natural gas royalty revenue fell to $2.6 million from $9.8 million even as gas production increased, because the realized price dropped to $0.40 per Mcf from $1.83.

The consolidated revenue increase was also limited by a $20.9 million decline in land-sale revenue—Q2 had no land sales compared with $20.9 million in Q1—and a $7.1 million decrease in water sales. Easements and other surface-related income increased by $6.3 million, while produced water royalties added $3.5 million.

Profitability, Free Cash Flow and Capital Allocation

Operating income grew faster than revenue because operating expenses were essentially flat. The resulting operating-margin expansion, combined with higher other income, helped net income rise to a company record.

TPL also reported record non-GAAP free cash flow of $155.5 million. During the quarter, the company completed $110.2 million of aggregate land acquisitions in Shackelford, Jones and Winkler Counties in connection with its land, data-center and power-generation initiatives.

A quarterly dividend of $0.60 per share was paid on June 15. On August 4, the board declared another $0.60 quarterly dividend, payable September 15 to shareholders of record on September 1.

Management’s View

Management attributed the record results to higher oil prices, record royalty production and record produced water volumes. Because TPL’s commodity exposure was unhedged, the company captured the benefit of the quarter’s elevated oil prices, while remaining exposed to the sharp decline in realized natural gas pricing.

TPL is also expanding its land and water strategy beyond traditional royalty income. Under Project Kilby, the company will provide land and brackish water resources for a Chevron subsidiary’s large-scale power-generation project supporting a data center in Reeves County. The Shackelford and Jones County acquisitions extend those efforts beyond the immediate Permian Basin.

The company completed construction and began commissioning its Phase 2B produced-water desalination facility in Orla, Texas. The test facility has anticipated inlet capacity of 10,000 barrels per day and is intended to evaluate freshwater and concentrated-brine applications alongside reduced produced-water injection needs.

Risks Investors Need to Watch

• Commodity-price exposure: TPL’s unhedged position benefited from higher oil prices, but the decline in natural gas royalty revenue demonstrates the downside of direct commodity-price exposure.
• Customer activity decisions: Royalty production, water demand and surface revenue depend on drilling, completion and operating decisions made by TPL’s customers.
• Water-sales volatility: Sequential water sales volume fell about 18.2%, showing that higher pricing may not fully offset changes in completion-related demand.
• Uneven quarterly revenue mix: Land sales contributed $20.9 million in Q1 but nothing in Q2, making sequential revenue comparisons sensitive to transaction timing.
• Execution of new projects: Project Kilby, the recently acquired land and the Orla desalination facility remain initiatives whose development and commercialization will affect their eventual financial contribution.

Summary

TPL’s Q2 2026 results were led by record royalty production, higher realized oil prices and rising produced-water royalties. Those gains overcame lower water sales, weak natural gas pricing and the absence of Q1 land-sale revenue, while nearly flat operating expenses supported faster earnings growth. The main issues to monitor are commodity-price exposure, customer drilling and water demand, and the execution of TPL’s data-center, power-generation and water-treatment initiatives.