Texas Pacific Land Corporation

Texas Pacific Land Corp reported record quarterly total revenue of approximately $246 million, up 31% year over year, alongside record net income and free cash flow. Oil and gas royalty production reached a record average of about 39,700 barrels of oil equivalent per day, a 20% increase, while produced water royalty volumes hit a record 4.9 million barrels per day, up 15%. The company is advancing a multi-gigawatt data center project with Chevron and has acquired 10,000 acres in Shackelford and Jones County, Texas, expanding beyond its legacy Permian footprint. Management is in advanced talks on 25 gigawatts of projects with hyperscalers, AI labs, and power generators, and expects to announce at least one major definitive agreement soon. Water sales volumes declined 19% sequentially due to weak natural gas prices, and the oil cut in production dipped to the mid-30% range, below the expected long-term level of over 40%, partly due to accounting noise and gas-rich development.

An analysis identifies ConocoPhillips and Texas Pacific Land as energy stocks capable of generating sustainable market-beating returns, while Kosmos Energy is flagged as one to avoid. ConocoPhillips, with a market cap of $140.8 billion and revenue of $60.5 billion, is praised for its 8% annual revenue growth over the last ten years and strong free cash flow. Texas Pacific Land, valued at $27.36 billion, owns roughly 868,000 acres in the Permian Basin and earns revenue from oil and gas royalties, water services, and land leases. In contrast, Kosmos Energy, with a market cap of $1.45 billion and revenue of $1.37 billion, faces concerns over declining efficiency, negative free cash flow, and limited scale. The energy sector has returned 12.6% over the past six months, outperforming the S&P 500 by 6.4 percentage points.

Energy investors face two opposing shocks: Iran's renewed closure of the Strait of Hormuz has pushed Brent crude above $86, while rising bond yields signal a hawkish Federal Reserve unlikely to cut rates soon. Five companies stand out as able to benefit from the crude surge without relying on cheap credit. ExxonMobil holds a 13 percent net-debt-to-capital ratio and $8.4 billion in cash, with upstream earnings of $5.7 billion driven by record Guyana output. EOG Resources is completely unhedged, giving shareholders full exposure to oil gains, and targets debt below one times EBITDA at $45 oil, ending the first quarter with $3.8 billion in cash. Valero is capitalizing on record refining margins, with second-quarter Gulf Coast indicators near $30 a barrel, and recently issued $850 million in notes to clear near-term maturities. Cheniere Energy, the largest U.S. LNG exporter, saw first-quarter adjusted EBITDA rise 25 percent as Gulf gas disruptions boost demand, though it carries higher leverage from terminal construction. Texas Pacific Land carries zero debt and $248 million in cash, collecting royalties across 881,000 surface acres in the Permian Basin, and posted record first-quarter revenue of $237 million.

Shares of Texas Pacific Land Corporation rallied 52.4% in the first half of 2026. The company benefited from higher oil and gas prices driven by the war in Iran, given its 882,000 surface acres and 224,000 net royalty acres near the Permian Basin. West Texas is also becoming a prime location for AI data centers, and Texas Pacific Land secured a partnership with AI data center start-up Bolt, led by former Alphabet CEO Eric Schmidt, investing $50 million in December and gaining rights to supply power and water. In June, the company announced a deal with Chevron to provide land and brackish water for a power generation plant supporting a data center in Reeves County, Texas. The stock faced pressure in March and April from falling oil prices and the unexpected death of Horizon Kinetics Holdings' CEO, its largest shareholder, but rebounded on the Chevron news.

Texas Pacific Land reported stronger-than-expected first-quarter 2026 results and announced an agreement with Chevron to provide land and brackish water for a power generation facility in Reeves County, Texas. The Chevron Project Kilby deal adds a fee-based revenue stream that could diversify earnings beyond traditional oil and gas royalties, though the company remains heavily exposed to Permian Basin activity and regulatory risks. Analyst estimates project around $1.3 billion in revenue and $826 million to $837 million in earnings by 2029, with some caution that power or data center projects may underperform. The stock currently trades at a 12% discount to one fair value estimate of $445, while other estimates suggest a potential downside of 37%.

Texas Pacific Land may be about 11% undervalued relative to the average analyst price target, with a most-followed fair value estimate of $445 against a last close of $397.82. The stock has returned 6.03% over the past month and 33.51% year-to-date, while its three-year total shareholder return stands at 170.22%. Recent developments include a disclosed single-share purchase by Horizon Kinetics Asset Management, a more than 10% shareholder, and an agreement with Chevron for land and brackish water supply, alongside first-quarter 2026 financial results that surpassed analyst expectations. However, the stock trades at 54.5 times earnings, roughly four times the US Oil and Gas industry average of 13.4 times, suggesting investors are paying a steep premium for perceived quality and growth. The key question is whether the market could eventually lean back toward a lower fair price-to-earnings ratio of 21.5 times.

Chevron has selected Texas Pacific Land Corporation to provide land and brackish water resources for Project Kilby, a $7 billion initiative with Microsoft to build a 2.67 gigawatt natural gas-fired power facility in West Texas. Texas Pacific Land will supply surface acreage for cash and the exclusive right to source aquifer-derived water for the facility. The company is also tasked with providing brackish groundwater to reduce freshwater demand and advanced solutions for reusing desalinated produced water from oil and gas operations. Chevron’s Vice President of Power Solutions, Daniel Droog, said the project demonstrates how large-scale energy infrastructure can be developed responsibly in West Texas to meet increasing power and technology demands.