TPL Texas Pacific Land Corporation
Superb Permian royalty franchise, but the price already assumes decades of flawless growth.
The story
Texas Pacific Land owns about 870,000 surface acres and large royalty interests in the core of the Permian Basin. It earns oil and gas royalties, water sales, and easement fees with almost no operating cost, which makes it a rare hard-asset franchise that competitors cannot copy. It is a mature royalty owner that is still growing, as Permian activity, produced-water handling, and newer power and data-center land uses stretch its runway. Its revenue still rises and falls with commodity prices and operators' drilling pace.
The moat comes from irreplaceable acreage and decades of drilling inventory, so a 12-year horizon and roughly 12% near-term growth are justified; margins hold near the current 76-78% rather than the 84% peak. Sales-to-capital is set at 1.5, not the reported 0.62, because recent capex was largely one-off land, royalty and water-infrastructure purchases, while the core royalty book needs very little capital. Beta sits slightly below the industry anchor because TPL carries no debt and has no operating cost exposure, though its revenue still tracks commodity prices.
Value drivers
| Revenue growth (Y1) | 12.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 12y |
| Target operating margin | 70.0% |
| Years to target margin | 3 |
| Sales-to-capital | 1.50 |
| Beta | 1.00 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 9.7% |
| Terminal WACC | 9.7% |
Valuation bridge
| PV of explicit FCFF | 5.29B |
| PV of terminal value | 4.83B |
| Equity value | 10.06B |
| ÷ shares → per share | $145.83 |
News
bearish -0.30 · 8 articles
- Q2 Earnings Highs And Lows: Texas Pacific Land (NYSE:TPL) Vs The Rest Of The U.S. Shale E&P Stocks
- Is Texas Pacific Land Stock Underperforming the Nasdaq?
- 2 Mid-Cap Stocks with Exciting Potential and 1 We Avoid
- 2 Energy Stocks with Impressive Fundamentals and 1 We Find Risky
- 3 Oil Stocks Retail Investors Are Screening As Crude Price Risk Returns
- Texas Pacific Land (TPL) Dropped, What Is Driving Attention Now?
- Texas Pacific Land (TPL) Stock May Look Rich After Cramer Backing
- Did Jim Cramer’s Mad Money Spotlight on TPL Reframe Texas Pacific Land’s Asset-Light Royalty Story?
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 1.01B | 12.0% | 75.1% | 595.13M | 71.80M | 523.32M | 477.12M |
| 2 | 1.12B | 11.2% | 72.5% | 639.36M | 74.94M | 564.43M | 469.16M |
| 3 | 1.23B | 10.4% | 70.0% | 681.01M | 77.22M | 603.79M | 457.57M |
| 4 | 1.35B | 9.5% | 70.0% | 746.01M | 78.49M | 667.52M | 461.20M |
| 5 | 1.47B | 8.7% | 70.0% | 811.12M | 78.62M | 732.50M | 461.41M |
| 6 | 1.59B | 7.9% | 70.0% | 875.27M | 77.46M | 797.80M | 458.18M |
| 7 | 1.70B | 7.1% | 70.0% | 937.33M | 74.94M | 862.39M | 451.54M |
| 8 | 1.80B | 6.3% | 70.0% | 996.13M | 71.00M | 925.13M | 441.63M |
| 9 | 1.90B | 5.5% | 70.0% | 1.05B | 65.61M | 984.85M | 428.63M |
| 10 | 1.99B | 4.6% | 70.0% | 1.10B | 58.81M | 1.04B | 412.81M |
| 11 | 2.07B | 3.8% | 70.0% | 1.14B | 50.68M | 1.09B | 394.49M |
| 12 | 2.13B | 3.0% | 70.0% | 1.18B | 41.34M | 1.13B | 374.03M |
Key risks
- Oil and gas price declines or reduced Permian rig activity cutting royalty volumes
- Valuation near 26x sales depends on long-duration growth that intrinsic drivers struggle to support
- Water and easement growth, plus new uses like power and data centers, may develop more slowly than the market expects
Catalysts
- Permian production growth and continued development of TPL acreage by major operators
- Monetization of land for power, data centers, and produced-water desalination