Texas Pacific Land Corporation

Texas Pacific Land’s moat rests on irreplaceable land and mineral interests concentrated in the highest-quality U.S. oil basin. The company owns about 874,000 surface acres and roughly 207,000 net royalty acres, plus nonparticipating perpetual royalty interests, enabling it to collect royalties and surface-use fees across well life cycles.

Efficient scale and location advantages restrict credible entrants. Additional moats include switching frictions for operators who need contiguous rights of way, easements, water access and produced-water solutions.

Risks to moat durability come from (a) basin activity cyclicality, (b) regulatory constraints on disposal that could shift fee mix, and (c) potential long-term technology changes in water handling that compress rents. Net, the combination of intangible assets and efficient scale merits a strong but not near-perfect moat score.

Oil and gas royalties participate in commodity prices and volumes rather than explicit pricing power. However, surface and easement revenues, along with certain water-related fees, reflect the company’s ability to charge for access to its land.

Produced water royalties are fee-based and not directly tied to commodity prices, giving partial insulation. Overall pricing latitude is real in surface and water, but the aggregate portfolio remains exposed to commodity and activity levels, keeping this below the very top tier.

Revenue durability benefits from broad Permian development, but top line is still driven by producer activity and realized commodity prices. The EIA projects U.S. output at record levels and continued Permian growth into 2025–2026, which supports volumes, though price volatility can swing cash flows.

Water handling needs continue to rise with produced-water volumes, adding a secular tailwind. These positives are offset by regulatory tightening on saltwater disposal that may alter mix and timing. Predictability is solid but not in the tollbooth class of global networks.

TPL operates with no reported financial debt, substantial cash, and very low capital intensity. As of June 30, 2025 cash and equivalents were about 544 million dollars vs total liabilities of ~116 million dollars, and TTM net margin approximated 62 percent.

The model scales with minimal maintenance capex, providing high free cash conversion and resilience. The balance sheet easily covers dividends and opportunistic capital returns while retaining flexibility for targeted mineral and surface acquisitions.

We view capital allocation as solid with some tradeoffs. In 2024 TPL deployed ~396 million dollars to acquire mineral interests and 45 million dollars for surface assets, while also paying a 10 dollar per share special dividend and regular quarterly dividends.

Share repurchases were modest at ~29 million dollars in 2024 and none in 1H25, and management has articulated a 700 million dollar cash target before leaning into incremental buybacks or specials. The mix shows prudence and balance-sheet conservatism, though some investors may prefer heavier repurchases at prudent valuations.

Leadership has executed the corporate reorganization, expanded monetization avenues, and navigated shareholder disputes. The Delaware Supreme Court’s 2024 decision affirmed the company’s position in litigation with the Investor Group, reducing governance overhang.

We would like to see continued transparency around long-term capital return pacing and clearer hurdle frameworks for acquisitions and desalination investments, but overall stewardship appears competent and aligned.