TXO

TXO Partners, L.P. - 10-Q Filing Summary (Q1 2026)

Business Context and Reporting Period

This is the Quarterly Report on Form 10-Q for TXO Partners, L.P., an independent oil and natural gas company, for the period ended March 31, 2026. The company operates primarily in the Permian Basin, San Juan Basin, and Williston Basin. As of May 4, 2026, there were 55,242,507 common units outstanding.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 66% to $28.3 million. This was primarily driven by a $91.3 million net loss on hedging activities (comprising $68.0 million in unrealized losses and $13.7 million in realized losses), compared to $9.5 million in hedging losses in Q1 2025. Without hedging impacts, revenue from customers was $119.6 million.
• Production Increase: Total production increased by 577 MBoe (25%) to 2,906 MBoe, largely due to the White Rock Energy (WRE) acquisition in the Williston Basin.
• Expense Growth: Total expenses rose to $105.8 million from $87.9 million. Depreciation, depletion, and amortization (DD&A) increased 35% to $28.8 million due to higher production volumes from the WRE acquisition. General and administrative expenses nearly doubled to $4.8 million, driven by personnel costs and unit-based compensation amortization.
• Net Loss: The company reported a net loss of $74.3 million, a significant swing from the $2.4 million net income in the prior year, almost entirely attributable to the mark-to-market losses on commodity derivatives.

Guidance, Outlook, and Management Commentary

• Asset Dispositions: In March 2026, the company announced the sale of Cross Timbers Energy properties for approximately $200 million gross. Two transactions closed in April 2026 with net proceeds of ~$39 million to date. The third transaction is expected to close by the end of Q2 2026. Total expected net proceeds are ~$100 million.
• Capital Allocation: Proceeds from the Cross Timbers sales are intended to fund the $70.0 million deferred payment for the WRE acquisition, due July 31, 2026.
• Liquidity: The company has $140.0 million available under its Credit Facility (borrowing base increased to $410 million in July 2025). Management believes it has adequate liquidity to continue as a going concern for the next 12 months.
• Distributions: A cash distribution of $0.36 per unit was declared for Q1 2026, payable May 22, 2026.
• Market Outlook: Management notes continued volatility in oil and gas prices due to geopolitical tensions (Middle East, Ukraine) and inflationary pressures on operating costs (steel, chemicals, labor).

Investor Verification Checklist

• Derivative Exposure: Verify the magnitude of the $91.3 million hedging loss and its impact on reported revenue versus actual cash flows from commodity sales.
• Cross Timbers Closing: Confirm the closing of the third Cross Timbers transaction and the final net proceeds to ensure the $70 million deferred payment obligation can be met by July 31, 2026.
• Working Capital: Review the negative net working capital position of $70.0 million, which is primarily driven by the deferred payment liability.
• Debt Covenants: Confirm continued compliance with the Credit Facility covenants, specifically the current ratio and leverage ratio, given the volatility in commodity prices.
• Production Costs: Monitor the trend in production expenses per Boe ($16.43 in Q1 2026) to ensure inflationary pressures do not erode margins further.