TXO Partners, L.P. - 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
This summary covers the Annual Report on Form 10-K for TXO Partners, L.P. for the fiscal year ended December 31, 2025. TXO Partners is an independent oil and natural gas company focused on the acquisition, development, optimization, and exploitation of conventional reserves in North America. Operations are concentrated in the Permian Basin (West Texas/New Mexico), San Juan Basin (New Mexico/Colorado), and Williston Basin (Montana/North Dakota). The company operates as a publicly traded partnership (PTP) and is classified as an emerging growth company.
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Total Revenues | $401.0 million | $282.8 million | +42% |
| Net Income (Loss) | $(21.6) million | $23.5 million | Loss vs. Profit |
| Adjusted EBITDAX | $142.1 million | $108.7 million | +31% |
| Cash Flow from Operations | $118.2 million | $109.3 million | +8% |
| Development Capital Expenditures | $71.1 million | $28.0 million | +154% |
| Total Capital Expenditures (incl. Acquisitions) | $335.3 million | $288.3 million | +16% |
| Outstanding Debt (Credit Facility) | $284.0 million | $150.0 million | +89% |
| Available Cash for Distribution | $54.8 million | $79.1 million | -31% |
| Proved Reserves (MBoe) | 129.1 million | 93.8 million | +38% |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased by $118.2 million (42%) primarily due to a 20% increase in production volumes (1,758 MBoe) driven by the Williston Basin acquisitions and a 27% increase in average natural gas selling prices. This was partially offset by a 16% decrease in average oil prices.
- Net Loss: The company reported a net loss of $21.6 million in 2025 compared to net income of $23.5 million in 2024. The loss was driven by a $42.4 million impairment of long-lived assets related to the Cross Timbers joint venture, increased depreciation, depletion, and amortization (DD&A) due to higher production costs in the Williston Basin, and higher interest expense.
- Acquisitions: In July 2025, the company completed the acquisition of assets from White Rock Energy (WRE) in the Williston Basin for $331.6 million (including a $70.0 million deferred payment). In August 2024, it acquired assets from Eagle Mountain Energy Partners and Kaiser-Francis Oil Company.
- Production Mix: Average daily production increased to 28,268 Boe/d in 2025 from 23,479 Boe/d in 2024. The Williston Basin now represents a significant portion of the portfolio, with a higher cost basis than historical properties.
- Debt and Liquidity: Borrowings under the Credit Facility increased to $284.0 million to fund acquisitions. The borrowing base was increased to $410.0 million in July 2025. The company had $126.0 million in availability under the facility as of year-end.
Guidance, Outlook, and Risks
- 2026 Capital Budget: Management expects to incur approximately $70 million in development capital expenditures in 2026, primarily funded by cash flow from operations. The budget focuses on drilling and recompletion work, with over 65% allocated to the Williston Basin.
- Outlook: Management anticipates continued volatility in commodity prices. Oil prices moderated in late 2024 and 2025 due to increased supply and OPEC unwinding output cuts. The company expects to maintain a net debt-to-Adjusted EBITDAX ratio between one and two times.
- Key Risks:
- Commodity Price Volatility: Significant exposure to fluctuations in oil, natural gas, and NGL prices.
- Geographic Concentration: Operations are concentrated in three basins, increasing vulnerability to regional regulatory or supply/demand shocks.
- Debt Covenants: The Credit Facility includes financial covenants (e.g., leverage ratio, current ratio) and hedging requirements that could restrict business activities if not met.
- Impairment Risk: Future declines in commodity prices could trigger additional impairments of proved properties.
- Regulatory/Environmental: Risks related to climate change regulations, methane emissions fees (though some were repealed in 2025), and water disposal restrictions.
- Unusual Items: The $42.4 million impairment charge in 2025 was a non-cash item related to the Cross Timbers joint venture assets in the Permian Basin due to lower oil prices and higher costs.
Investor Verification Checklist
- Deferred Payment Obligation: Verify the status and funding plan for the $70.0 million deferred payment on the WRE Acquisition due July 31, 2026. Management intends to use proceeds from pending Cross Timbers asset dispositions (expected ~$40 million) to fund a portion of this.
- Impairment Triggers: Monitor commodity price trends and the company's borrowing base redeterminations (March and September) to assess the risk of further asset impairments.
- Williston Basin Economics: Review the cost per Boe and decline rates for the newly acquired Williston Basin assets, as these have a higher cost basis than historical properties and significantly impact DD&A and margins.
- Hedging Strategy: Confirm the extent of open derivative positions (as of Dec 31, 2025, the company had a net derivative asset of $18.8 million) and how they align with the Credit Facility's hedging requirements based on the leverage ratio.
- Distribution Sustainability: Assess the trend in "Cash Available for Distribution" ($54.8 million in 2025 vs. $79.1 million in 2024) against the company's commitment to distribute all available cash, noting the Q4 2025 distribution of $0.30 per unit.