TXO Partners, L.P. (TXO) Stock Analysis and Metrics

TXO Partners

NYSE: TXO

$12.91 ▼ -0.23 (-1.75%)

At close: Jul 27, 2026 · 3:59 PM UTC

Financial Ratios

Market Cap712.86 Mn

P/E-5.87

P/S1.63

Div. Yield0.13

Total Debt (Qtr)280.60 Mn

Revenue Growth (1y) (Qtr)27.44

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About

TXO Partners, L. P. is an independent oil and natural gas company focused on the acquisition, development, optimization and exploitation of conventional and unconventional oil, natural gas and natural gas liquid reserves in North America. Its properties are concentrated in the Permian Basin of New Mexico and Texas, the San Juan Basin of New Mexico and Colorado and the Williston Basin of Montana and North Dakota. The company seeks to increase production and cash flow through strategic acquisitions drilling activities and operational improvements. The partnership is managed by TXO Partners GP, LLC, its general partner. It regularly evaluates acquisition opportunities to expand its reserve base and production capacity. Its portfolio includes both developed and undeveloped oil and natural gas properties.

The company generates revenue primarily from the sale of oil, natural gas liquids and natural gas produced from its owned properties. For the nine months ended September 30, 2025 total revenues reached $275.1 million, consisting of $190.4 million from oil and condensate, $23.9 million from natural gas liquids and $60.7 million from natural gas. For the three months ended September 30, 2025 total revenues were $100.9 million with oil and condensate contributing $66.3 million, natural gas liquids $7.5 million and natural gas $27.0 million. In addition, the company earns ancillary income from carbon dioxide and gas processing plant operations located in the Permian Basin and Colorado. To mitigate exposure to commodity price swings, TXO Partners uses derivative contracts that lock in prices for a portion of its expected production. During the nine months ended September 30, 2025 the company recognized net gains on its hedging activity of $16.9 million comprising $10.6 million unrealized and $6.3 million realized gains. During the three months ended September 30, 2025 the company recognized net gains on its hedging activity of $10.9 million comprising $7.8 million unrealized and $3.1 million realized gains. Ancillary income from carbon dioxide and gas processing plant operations contributed to other income which decreased year over year due to pipeline disruptions.

TXO Partners L. P. competes in the upstream oil and natural gas sector alongside numerous independent producers and major integrated companies. The company’s competitive stance is supported by its focus on three prolific basins, the Permian, San Juan and Williston, which provide geographic diversification and operational synergies. Its hedging program helps stabilize cash flows during periods of volatile commodity prices, a capability that many smaller peers lack. Access to capital is reinforced by a revolving credit facility with a borrowing base of $410 million as of September 30, 2025 and recent equity offerings that have provided substantial liquidity for acquisitions. As of September 30, 2025 the revolving credit facility had an outstanding balance of $264.0 million and remaining availability of $146.0 million. The facility requires maintenance of a current ratio greater than 1.0 to 1.0 and a total net debt to EBITDAX ratio not exceeding 3.0 to 1.0. Recent equity offerings in May 2025 generated net proceeds of approximately $189.5 million supporting the WRE Acquisition and general corporate purposes. The company’s strategy emphasizes a production and distribution model aiming to generate cash flow for distributions and debt service.

The company sells its production to a range of purchasers that include oil and gas traders, utility companies, refining enterprises and midstream service providers. Specific customer names are not disclosed in the filing, but the typical counterparties are marketing affiliates of major oil companies, independent gas utilities and regional refineries. Long term contracts with these counterparties help secure predictable outlet for the company’s hydrocarbon output. The company’s hydrocarbon output is typically sold under short term contracts tied to prevailing market prices. It also engages in occasional term agreements with regional refineries for a portion of its natural gas liquids production. The customer base is primarily domestic reflecting the company’s concentration of assets in United States basins.

Investment Thesis

▲ Bull case

TXO Partners, L.P. is positioned to benefit from a strategic pivot toward high-return development in the Williston Basin, where management has consistently highlighted outperformance from 2025 drilling activities and plans to allocate over 80% of its $70 million 2026 capital budget to this region. The Elm Coulee field, in particular, is being developed with long-lateral wells that are generating production above initial expectations, suggesting underappreciated operational efficiency and reservoir quality. This focus on a single, high-potential basin allows TXO to concentrate capital and expertise, reducing execution risk while maximizing decline rate mitigation and EUR (estimated ultimate recovery) upside. The company’s emphasis on cost discipline and full hedging for 2026 further insulates cash flow from near-term commodity volatility, creating a stable platform for reinvestment. Given that the Williston Basin continues to attract premium valuations due to its infrastructure maturity and lower break-even costs relative to other shale plays, TXO’s concentrated exposure could lead to re-rating if production growth exceeds market expectations.
The pending divestiture of Cross Timbers Energy’s assets—representing substantially all of the joint venture’s holdings—presents a material but underdiscussed catalyst for balance sheet strengthening and capital recycling. TXO expects to receive approximately $100 million in net proceeds, a significant sum relative to its enterprise value, which is explicitly earmarked to fund the $70 million deferred payment for the 2025 White Rock Energy acquisition due in July 2026. Successfully closing this transaction would not only eliminate a looming cash outflow but also free up residual proceeds for additional debt reduction, shareholder distributions, or reinvestment into higher-margin Williston and San Juan Basin opportunities. Management’s comment that operations will focus on the Williston, San Juan, and select Permian fields (Vacuum and Parker) post-sale signals a deliberate shift toward core, lower-risk assets with established production profiles. This deleveraging and portfolio simplification could reduce perceived financial risk and improve distribution coverage ratios, making the MLP more attractive to income-focused investors wary of overleveraged energy partnerships.
TXO’s distribution policy reflects a conservative and sustainable approach that the market may be undervaluing, particularly given the increase from $0.30 to $0.36 per unit quarter-over-quarter despite broader sector pressures on MLPs. This growth in distributions, supported by strong cash available for distributions (CAD) driven by cost discipline and hedged cash flow, indicates confidence in near-term operating performance and long-term reserve sustainability. The company’s ability to raise distributions while maintaining a full hedge book for 2026 suggests that underlying cash generation is robust enough to support both protection and growth—a rare combination in the current energy MLP landscape. Furthermore, the commentary about positioning for a “robust 2027” implies that management sees multi-year visibility in cash flow, potentially backed by undeveloped locations or optimization projects not yet fully reflected in analyst models. If TXO can sustain or grow distributions through 2027 amid fluctuating commodity prices, it could distinguish itself as a top-tier yield performer in a sector where many peers are cutting or holding payouts flat.

TXO Partners, L.P. is positioned to benefit from a strategic pivot toward high-return development in the Williston Basin, where management has consistently highlighted outperformance from 2025 drilling activities and plans to allocate over 80% of its $70 million 2026 capital budget to this region. The Elm Coulee field, in particular, is being developed with long-lateral wells that are generating production above initial expectations, suggesting underappreciated operational efficiency and reservoir quality. This focus on a single, high-potential basin allows TXO to concentrate capital and expertise, reducing execution risk while maximizing decline rate mitigation and EUR (estimated ultimate recovery) upside. The company’s emphasis on cost discipline and full hedging for 2026 further insulates cash flow from near-term commodity volatility, creating a stable platform for reinvestment. Given that the Williston Basin continues to attract premium valuations due to its infrastructure maturity and lower break-even costs relative to other shale plays, TXO’s concentrated exposure could lead to re-rating if production growth exceeds market expectations.
The pending divestiture of Cross Timbers Energy’s assets—representing substantially all of the joint venture’s holdings—presents a material but underdiscussed catalyst for balance sheet strengthening and capital recycling. TXO expects to receive approximately $100 million in net proceeds, a significant sum relative to its enterprise value, which is explicitly earmarked to fund the $70 million deferred payment for the 2025 White Rock Energy acquisition due in July 2026. Successfully closing this transaction would not only eliminate a looming cash outflow but also free up residual proceeds for additional debt reduction, shareholder distributions, or reinvestment into higher-margin Williston and San Juan Basin opportunities. Management’s comment that operations will focus on the Williston, San Juan, and select Permian fields (Vacuum and Parker) post-sale signals a deliberate shift toward core, lower-risk assets with established production profiles. This deleveraging and portfolio simplification could reduce perceived financial risk and improve distribution coverage ratios, making the MLP more attractive to income-focused investors wary of overleveraged energy partnerships.
TXO’s distribution policy reflects a conservative and sustainable approach that the market may be undervaluing, particularly given the increase from $0.30 to $0.36 per unit quarter-over-quarter despite broader sector pressures on MLPs. This growth in distributions, supported by strong cash available for distributions (CAD) driven by cost discipline and hedged cash flow, indicates confidence in near-term operating performance and long-term reserve sustainability. The company’s ability to raise distributions while maintaining a full hedge book for 2026 suggests that underlying cash generation is robust enough to support both protection and growth—a rare combination in the current energy MLP landscape. Furthermore, the commentary about positioning for a “robust 2027” implies that management sees multi-year visibility in cash flow, potentially backed by undeveloped locations or optimization projects not yet fully reflected in analyst models. If TXO can sustain or grow distributions through 2027 amid fluctuating commodity prices, it could distinguish itself as a top-tier yield performer in a sector where many peers are cutting or holding payouts flat.

▼ Bear case

TXO Partners, L.P.’s heavy reliance on the Williston Basin for future growth exposes it to basin-specific risks that may be underestimated, particularly regarding well performance degradation and declining returns on incremental investment. While management touts the Elm Coulee field’s performance above expectations, there is no disclosure of actual production volumes, decline rates, or capital efficiency metrics (such as F&D costs or IRR) to substantiate these claims, raising concerns about potential optimism bias. The Williston Basin, despite its advantages, has seen increasing competition for capital and service costs, and TXO’s focus on long-lateral wells could lead to diminishing returns if reservoir quality varies or if parent-child well interference becomes material. Furthermore, the company’s acknowledgment of uncertainties around reserve estimates and the impact of commodity price declines on economic producibility suggests that a prolonged downturn could quickly erode the value of its drilling inventory, especially if hedges roll off after 2026 and leave the company exposed to spot prices.
The anticipated $100 million in proceeds from the Cross Timbers divestiture, while beneficial, carries significant execution risk that may not be fully appreciated, as the transaction remains subject to customary closing conditions with no guarantee of completion. The press release explicitly states there can be no assurance that all conditions to closing will be satisfied, introducing uncertainty around timing and ultimate proceeds—factors that could disrupt TXO’s plan to fund the $70 million White Rock deferred payment due July 31, 2026. Any delay or shortfall in proceeds would force the company to either draw on credit facilities, issue additional units (potentially dilutive), or divert operating cash flow, thereby threatening distribution coverage or increasing leverage. Moreover, the focus on “customary purchase price adjustments” implies that the final net proceeds could be materially lower than $100 million due to post-closing audits, environmental liabilities, or title defects, especially given the complexity of divesting non-operated interests in a joint venture structure.
TXO’s long-term outlook is clouded by structural challenges in the conventional oil and gas sector, where declining reserve bases and limited high-quality acquisition opportunities may hinder sustainable growth beyond the near term. Despite management’s references to a “decade” of low-risk projects in the Permian, San Juan, and Williston basins, the company’s focus on conventional reserves—rather than unconventional shale—puts it at a disadvantage in an industry increasingly dominated by scale, technological innovation, and low-cost producers. The San Juan Basin, in particular, faces infrastructure constraints and lower netbacks due to gas-rich composition and limited takeaway capacity, while the Permian exposure is restricted to older, legacy fields (Vacuum and Parker) that likely offer modest growth potential and higher operating costs per barrel. Without access to major unconventional plays or the ability to compete for premium acreage, TXO may struggle to replace reserves organically, leading to a gradual decline in production and cash flow unless it continues to rely on accretive acquisitions—a strategy that becomes harder to execute as balance sheet strength diminishes post-divestiture and deferred payment obligations are met.

TXO Partners, L.P.’s heavy reliance on the Williston Basin for future growth exposes it to basin-specific risks that may be underestimated, particularly regarding well performance degradation and declining returns on incremental investment. While management touts the Elm Coulee field’s performance above expectations, there is no disclosure of actual production volumes, decline rates, or capital efficiency metrics (such as F&D costs or IRR) to substantiate these claims, raising concerns about potential optimism bias. The Williston Basin, despite its advantages, has seen increasing competition for capital and service costs, and TXO’s focus on long-lateral wells could lead to diminishing returns if reservoir quality varies or if parent-child well interference becomes material. Furthermore, the company’s acknowledgment of uncertainties around reserve estimates and the impact of commodity price declines on economic producibility suggests that a prolonged downturn could quickly erode the value of its drilling inventory, especially if hedges roll off after 2026 and leave the company exposed to spot prices.
The anticipated $100 million in proceeds from the Cross Timbers divestiture, while beneficial, carries significant execution risk that may not be fully appreciated, as the transaction remains subject to customary closing conditions with no guarantee of completion. The press release explicitly states there can be no assurance that all conditions to closing will be satisfied, introducing uncertainty around timing and ultimate proceeds—factors that could disrupt TXO’s plan to fund the $70 million White Rock deferred payment due July 31, 2026. Any delay or shortfall in proceeds would force the company to either draw on credit facilities, issue additional units (potentially dilutive), or divert operating cash flow, thereby threatening distribution coverage or increasing leverage. Moreover, the focus on “customary purchase price adjustments” implies that the final net proceeds could be materially lower than $100 million due to post-closing audits, environmental liabilities, or title defects, especially given the complexity of divesting non-operated interests in a joint venture structure.
TXO’s long-term outlook is clouded by structural challenges in the conventional oil and gas sector, where declining reserve bases and limited high-quality acquisition opportunities may hinder sustainable growth beyond the near term. Despite management’s references to a “decade” of low-risk projects in the Permian, San Juan, and Williston basins, the company’s focus on conventional reserves—rather than unconventional shale—puts it at a disadvantage in an industry increasingly dominated by scale, technological innovation, and low-cost producers. The San Juan Basin, in particular, faces infrastructure constraints and lower netbacks due to gas-rich composition and limited takeaway capacity, while the Permian exposure is restricted to older, legacy fields (Vacuum and Parker) that likely offer modest growth potential and higher operating costs per barrel. Without access to major unconventional plays or the ability to compete for premium acreage, TXO may struggle to replace reserves organically, leading to a gradual decline in production and cash flow unless it continues to rely on accretive acquisitions—a strategy that becomes harder to execute as balance sheet strength diminishes post-divestiture and deferred payment obligations are met.

Segments Breakdown of Revenue (2025)

Peer Comparison

Companies in the Oil & Gas E&P

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	COP	Conocophillips	141.43 Bn	19.32	2.46	23.33 Bn
2	EOG	Eog Resources Inc	74.61 Bn	13.57	3.12	7.93 Bn
3	FANG	Diamondback Energy, Inc.	55.39 Bn	276.97	3.64	13.90 Bn
4	WDS	Woodside Energy Group Ltd	41.28 Bn	12.23	3.18	11.96 Bn
5	OXY-WT	Occidental Petroleum Corp /De/	32.80 Bn	8.09	1.64	15.67 Bn
6	EQT	EQT Corp	32.48 Bn	10.87	3.41	5.77 Bn
7	TPL	Texas Pacific Land Corp	27.36 Bn	50.38	32.61	-
8	DVN	Devon Energy Corp/De	26.53 Bn	10.79	1.56	8.39 Bn

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Investment Thesis

Product and Service Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

Research Tools

Developers

About

Investment Thesis

Product and Service Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

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