Contradictions in Focus: Analyzing Permian Basin Water Growth, M&A Landscape, and Commodity Price Impact

Record Financial Performance Amidst Commodity Price Volatility:
- Texas Pacific Land Corporation (TPL) reported consolidated total revenue of $188 million and adjusted EBITDA of $166 million for Q2 2025, with an adjusted EBITDA margin of 89%.
- Despite the average WTI Cushing oil price during the quarter averaging $64 per barrel, TPL set quarterly revenue records for produced water royalties and easements, driven by strong performance across major revenue streams and key performance indicators.

Permian Basin Activity and Potential:
- Permian horizontal oil-directed rig counts declined over 20% from their 2023 peak, contributing to speculation about the basin reaching its production peak.
- TPL's perspective is that the Permian still retains a long runway of undeveloped inventory, with over 60,000 locations remaining with breakevens below $60 oil and $3 natural gas, representing undeveloped resource upwards of 30 billion barrels of oil.

Desalination Efforts and Water Management:
- TPL continues to progress with its Phase 2b desalination facility, a 10,000 barrel per day facility that will intake Permian produced water and output high-quality freshwater.
- This project aims to reduce the amount of produced water injected subsurface while providing a valuable freshwater stream for various industrial activities, positioning the company to capture a substantial amount of the produced water volume growth.

Ongoing Innovation and Technological Advancements:
- Operators in the Permian are adopting new development practices like increased fluid and proppant loading, produced water recycling, and the use of lightweight proppants to enhance recovery factors.
- These advancements are allowing operators to explore new formations and boundary extensions, increasing drilling inventory and pushing the boundaries of the basin.