Texas Pacific Land Plunges 7.5%—Is the Permian Basin's Water Drought a Harbinger of Deeper Woes?

Summary
• TPL’s stock nosedives to $878.9, a 7.5% intraday slump from its 2025 high of $961.0
• Earnings call reveals 34% plunge in water sales, a critical revenue stream
• Permian Basin operators defer activity amid $64/bbl WTI, sparking sector-wide jitters

At 7:19 PM ET, Texas Pacific Land’s shares have cratered to $878.9, erasing nearly $72 billion in market value since the quarter’s open. The selloff follows a Q2 earnings call where management admitted a 34% drop in water sales—a segment contributing $31 million in royalties. With the Permian Basin’s operators curtailing activity due to four-year-low oil prices, investors are scrambling to parse whether this is a cyclical correction or a structural shift in TPL’s diversified revenue model.

Water Sales Drought Sparks Investor Exodus
TPL’s 7.5% intraday collapse is directly tied to its Q2 water sales plummeting 34%, a segment that historically underpins 15% of its revenue. Management attributed the decline to reduced operator activity as WTI averaged $64/bbl—the lowest since 2021. While royalty production hit a record 33,200 BOE/d and easement income surged to $36 million, the water sales slump triggered a knee-jerk sell-off. Investors are now recalculating TPL’s exposure to cyclical energy markets, with the 34% drop in water sales amplifying fears of margin compression in a low-price environment.

Oil & Gas Sector Mixed as TPL Trails Sector Leaders
Exxon Mobil (XOM), the sector’s bellwether, fell 0.225% on the session, reflecting broader energy market fragility. However, TPL’s 7.5% drop starkly contrasts with the sector’s muted response, underscoring its unique vulnerability to Permian-specific headwinds. While upstream peers like Devon Energy (DVN) remain flat, TPL’s water-centric business model—exposed to both commodity prices and operator spending—has amplified its volatility. The sector’s mixed performance highlights TPL’s divergence as a land and water play rather than a pure-play E&P.

Bearish Technicals and a Void in Options: Navigating the TPL Downturn
• MACD: -31.13 (bearish divergence from signal line at -34.36)
• RSI: 40.94 (oversold territory, but bearish momentum intact)
• Bollinger Bands: 911.68–1048.53 (price near lower band, signaling oversold exhaustion)
• 200D MA: 1243.90 (price 33% below, reinforcing bearish bias)

The technicals paint a grim picture: TPL is trading at a 42% discount to its 200-day average and within 10% of its 52W low of $766.51. The RSI at 40.94 suggests oversold conditions, but the MACD histogram’s negative breadth indicates bearish momentum is unrelenting. With no options chain provided, short-term traders should focus on key support levels. The 200D MA at $1243.90 acts as a distant ceiling; immediate resistance lies at the 30D MA ($1005.67). A breakdown below $911.68 (lower Bollinger Band) would validate a 20%+ decline. Given the lack of options liquidity, leveraged ETFs are off the table, but cash-secured puts could be considered for aggressive downside bets.

Backtest Texas Pacific Land Stock Performance
The iPath S&P 500 VIX Short-Term Futures ETN (TPL) has historically shown resilience following a significant intraday plunge of at least -8%. Backtesting reveals a 3-day win rate of 55.72%, a 10-day win rate of 53.54%, and a 30-day win rate of 54.99%, indicating a higher probability of positive returns in the short term. The average 3-day return is 0.67%, the 10-day return is 1.73%, and the 30-day return is 4.93%. The maximum return during the backtest period was 10.68%, which occurred on day 59 after the plunge, suggesting that TPL often experiences a recovery period before achieving its highest returns.

TPL’s Water Woes: A Warning Shot for Permian Landowners
TPL’s 7.5% collapse is a cautionary tale for Permian Basin landowners. While management insists activity will rebound in Q3, the 34% water sales drop exposes the fragility of its non-royalty streams. Investors must watch the 200D MA at $1243.90 as a critical inflection point—if TPL fails to reclaim this level, the 52W low of $766.51 becomes a looming threat. Meanwhile, Exxon Mobil’s -0.225% move signals broader energy market fragility. For TPL, the path forward hinges on operator spending resuming and desalination projects gaining traction. Short-term traders: watch for a breakdown below $911.68; long-term bulls: hold for a rebound above $1005.67.