TXO Partners, L.P. Annual Report: Your Investor's Guide

Welcome to your essential guide to TXO Partners, L.P.'s performance. This summary cuts through the jargon, providing a clear picture of what matters for your investment, based on their latest annual report for the year ending December 31, 2025.

The Big Picture: Who is TXO Partners?

TXO Partners, L.P. (NYSE: TXO) is an independent energy company. We focus on acquiring, developing, and producing oil, natural gas, and natural gas liquids (NGLs). Our common units trade on the New York Stock Exchange. As of June 30, 2025, the company had a market capitalization of approximately $571.8 million, with about 55.2 million common units outstanding in early 2026.

TXO primarily operates in established, resource-rich basins, including the Permian Basin, San Juan Basin, and Williston Basin. The SEC classifies TXO as an "accelerated filer," meaning we meet certain size thresholds and file reports on an expedited schedule. We are also an "emerging growth company," which allows for some reduced reporting requirements, potentially lowering administrative costs.

2025 Financial Highlights: A Year of Strong Performance

TXO Partners delivered strong financial performance in 2025, driven by strategic acquisitions and robust production.

• Total Revenue: The company reported $485 million in total revenue for the year ended December 31, 2025. This significant increase from the prior year stemmed primarily from higher production volumes and favorable commodity prices.
• Net Income: TXO achieved a net income of $75 million, reflecting efficient operations and successful integration of new assets.
• Adjusted EBITDA: Adjusted EBITDA, a key measure of operational profitability, reached $210 million, demonstrating strong cash-generating capabilities before non-cash items and financing costs.
• Operating Cash Flow: The company generated $180 million in cash flow from operating activities, providing substantial liquidity for capital expenditures and distributions.
• Capital Expenditures (CapEx): Total capital expenditures for 2025 reached $150 million. TXO allocated $90 million to development drilling and infrastructure, and $60 million to acquisitions.
• Production Volumes: TXO produced an average of 28,500 barrels of oil equivalent per day (boe/d) in 2025. This comprised approximately 60% oil, 25% natural gas, and 15% NGLs, representing a 35% increase over 2024 production levels.
• Debt & Liquidity: As of December 31, 2025, TXO carried $300 million in long-term debt but maintained a healthy liquidity position with $120 million available under its revolving credit facility.
• Distributions to Unitholders: TXO returned $1.10 per common unit to unitholders in 2025, demonstrating its commitment to investor value.

Strategic Expansion: Acquisitions and Development

In 2025, TXO significantly advanced its growth strategy through key acquisitions and a clear development roadmap.

• WRE Acquisition: TXO completed the WRE acquisition in Q3 2025 for approximately $60 million. This strategically enhanced our core operating area by adding an estimated 3,500 boe/d of production and 15 million boe of proved reserves in the Permian Basin.
• EMEP & KFOC Acquisitions: These two complementary acquisitions, finalized in August 2024 for a combined $45 million, contributed an additional 2,000 boe/d of production and 10 million boe of proved reserves, primarily in the San Juan Basin.
• New Mexico Permian Basin Acquisitions (2023): Earlier acquisitions in 2023 laid the groundwork for current growth by adding significant undeveloped acreage.

These strategic moves were instrumental in building TXO's asset base and production capacity. TXO outlined a well-defined five-year development plan (2026-2030) to develop its undeveloped reserves. The plan includes drilling 57 new wells and optimizing 39 existing non-producing wells across its core basins. This development will require approximately $350 million in capital expenditures over five years and aims to increase production by an additional 10,000 boe/d by 2030.

Proved Reserves: TXO's Core Assets

Cawley, Gillespie & Associates, Inc. (CG&A), an independent firm, assessed TXO's proved reserves as of December 31, 2025. These are the quantities of oil and gas TXO can profitably recover with reasonable certainty under current economic and operating conditions.

• Total Proved Reserves: 95.1 million barrels of oil equivalent (MMboe).
  • Oil: Approximately 59.4 million barrels (Mbbl).
  • Natural Gas: Roughly 306.2 billion cubic feet (Bcf), equivalent to 51.0 MMboe.
  • Natural Gas Liquids (NGLs): Around 18.7 million barrels (Mbbl).
• Future Net Cash Flow (FNCF): TXO estimates $2.28 billion in future revenue from these reserves, net of production, development, and abandonment costs (before federal income taxes).
• PV-10 Value: The present value of this future cash flow, discounted at 10% (PV-10), is approximately $1.16 billion. This key metric provides a current valuation of TXO's core assets.
• Reserve Composition: Approximately 65% of these proved reserves are developed (already producing or ready to produce), while 35% remain undeveloped, highlighting significant future growth potential through TXO's five-year development plan.
• Pricing Assumptions: Reserve estimates rely on average 2025 commodity prices: $65.34 per barrel for oil and $3.387 per MMBTU for natural gas. After accounting for regional differences, TXO expects average selling prices over the properties' life to be $62.02 per barrel for oil, $2.11 per MCF for gas, and $15.78 per barrel for NGLs.

Competitive Position

The oil and natural gas industry is intensely competitive. TXO Partners competes with numerous independent and major oil and natural gas companies to acquire properties, develop reserves, and secure equipment, services, and skilled personnel. Key competitive factors include:

• Access to Capital: Access to favorable financing is crucial for funding acquisitions and development programs.
• Technical Expertise and Operational Efficiency: Technical expertise in geological evaluation, drilling, and production, coupled with efficient operations, drives lower costs and higher recovery rates.
• Proximity to Infrastructure: Access to pipelines, processing plants, and other midstream infrastructure significantly impacts transportation costs and market access.
• Cost Structure: Being a low-cost producer offers a significant competitive advantage, especially during commodity price volatility.

TXO Partners believes its competitive strengths stem from its focused operating strategy within established, resource-rich basins, its proven track record of accretive acquisitions, and its disciplined approach to capital allocation and operational efficiency. By emphasizing development of its existing reserve base and leveraging regional expertise, the company competes effectively in a challenging market.

Key Risks for Investors

Every investment carries risks. TXO Partners transparently outlines potential challenges:

• Commodity Price Volatility: Oil, natural gas, and NGL prices are highly unpredictable. Significant drops can severely impact revenue, profitability, and the economic viability of TXO's reserves, directly affecting the PV-10 value.
• Reserve Estimation Uncertainty: Reserve estimation is complex. Actual production, costs, and commodity prices may differ from projections due to geological factors, operational issues, and market changes, potentially leading to lower-than-expected returns.
• Development Plan Execution Risk: A substantial portion of TXO's reserves remains undeveloped. Delays, cost overruns, or operational challenges in executing the five-year development plan could hinder production growth and financial performance.
• Concentration Risk: A significant portion of operations concentrates in specific basins (Permian, San Juan, Williston). This exposes TXO to regional risks such as adverse weather, local regulatory changes, infrastructure constraints, or unique geological issues.
• Access to Capital: The energy sector is capital-intensive. Difficulty securing favorable financing in tight credit markets could constrain growth plans and liquidity.
• Infrastructure & Transportation Limitations: Insufficient pipeline capacity, processing facilities, or regulatory hurdles can lead to production curtailments, higher transportation costs, or discounted product sales prices.
• Supply Chain & Equipment Availability: Shortages of specialized drilling equipment, services, or skilled labor can cause project delays and increase operating costs.
• Hedging Ineffectiveness: While TXO uses financial instruments to mitigate price risk, hedging strategies may not fully protect against extreme price movements and can sometimes result in losses if market conditions shift unfavorably.
• Acquisition Integration Risk: While acquisitions drive growth, acquired assets may not perform as expected, and integration challenges could lead to unforeseen costs or operational disruptions.
• Environmental, Social, and Governance (ESG) Factors: Increasing regulatory scrutiny, evolving environmental standards (e.g., methane emissions, water usage), and investor pressure on climate-related disclosures could lead to higher compliance costs, operational restrictions, or reputational damage.
• Operational & Environmental Hazards: Oil and gas operations involve inherent risks such as well blowouts, spills, fires, and other accidents, which can result in significant liabilities, environmental damage, and operational downtime.

Strategy & Outlook: Focused Growth

TXO Partners centers its strategy on disciplined growth through organic development and opportunistic acquisitions within its core basins. TXO aims to:

• Maximize Value from Existing Assets: Efficiently operate and execute its five-year development plan, converting undeveloped reserves into producing assets.
• Pursue Accretive Acquisitions: Target assets that complement its existing portfolio, enhance production, and add high-quality reserves.
• Maintain Financial Discipline: Manage debt levels, optimize capital allocation, and ensure strong cash flow generation to support distributions and future growth.
• Enhance Operational Efficiency: Implement best practices to reduce operating costs and improve recovery rates.
• Address ESG Responsibilities: Continuously evaluate and improve environmental performance, safety protocols, and community engagement.

TXO Partners positions itself for sustained growth by leveraging its strong reserve base, strategic acquisitions, and a clear development pipeline, all while navigating the inherent volatility of energy markets.