10-K: TXO Partners Reports 2025 Net Loss Amid Acquisitions & Price Volatility

TXO Partners, L.P. reported a net loss of $21.6 million in 2025 despite significant production growth and strategic acquisitions, impacted by lower oil prices and increased operating costs.

Summary

• Reported a net loss of $21.6 million for the year ended December 31, 2025, compared to a net income of $23.5 million in 2024.
• Total revenues increased by 42% to $401.0 million in 2025 from $282.8 million in 2024, primarily due to increased production volumes.
• Average daily production rose to 28,268 Boe/d in 2025, up from 23,000 Boe/d in 2024, with 72% from operated assets.
• Proved reserves increased to 129,110.1 MBoe as of December 31, 2025, up from 93,825.6 MBoe in 2024, with 60% liquids and 80% proved developed.
• Completed the WRE Acquisition in July 2025 for $331.6 million, adding Williston Basin assets, with a deferred payment of $70.0 million due July 31, 2026.
• Executed agreements in February 2026 to dispose of certain Cross Timbers Energy assets, anticipating $40 million in proceeds to fund the WRE deferred payment, with closing expected in Q2 2026.
• Incurred $71.1 million in development capital expenditures in 2025, an increase from $28.0 million in 2024, with a budget of approximately $70 million for 2026.
• Recorded an impairment of long-lived assets of $42.4 million in 2025, related to Permian Basin assets within the Cross Timbers joint venture, primarily due to lower oil prices and higher costs.
• Outstanding borrowings under the Credit Facility increased to $284.0 million at December 31, 2025, from $150.0 million at December 31, 2024, with a borrowing base of $410.0 million.
• Net working capital was negative $71.8 million at December 31, 2025, largely due to the $70.0 million deferred payment for the WRE Acquisition.
• Cash Available for Distribution decreased to $54.8 million in 2025 from $79.1 million in 2024.
• The weighted average interest rate on Credit Facility borrowings was 7.9% in 2025, up from 8.6% in 2024 (note: the filing states 'up from 8.6% in 2024' but 7.9 is lower than 8.6, so this is likely a typo in the filing or refers to a different calculation).
• Average realized oil price (excluding derivatives) decreased by 16% to $61.58/Bbl in 2025, while average realized natural gas price (excluding derivatives) increased by 27% to $2.65/Mcf.
• Production expenses per Boe increased to $18.05 in 2025 from $17.56 in 2024, and DD&A per Boe increased to $9.36 from $6.12.
• No proved undeveloped reserves were converted to proved developed reserves in 2023, 2024, or 2025; development costs were primarily for drilling new wells that resulted in additional proved developed reserves.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with a moderately negative sentiment. While operational growth and reserve additions are strong, the reported net loss, significant impairment charges, and increased cost structure raise concerns about profitability and efficiency, despite strategic acquisitions.

Positives

• Total revenues increased by 42% to $401.0 million in 2025, driven by higher production volumes.
• Average daily production significantly increased to 28,268 Boe/d in 2025, up from 23,000 Boe/d in 2024.
• Proved reserves grew substantially to 129,110.1 MBoe as of December 31, 2025, a 37.6% increase from 2024.
• Successful acquisition of Williston Basin assets from White Rock Energy, LLC for $331.6 million, contributing to reserve and production growth.
• The borrowing base under the Credit Facility was increased from $275 million to $410 million in July 2025, enhancing liquidity.
• Net gains on hedging activity contributed $40.4 million to revenues in 2025, including $31.5 million in unrealized gains and $8.9 million in realized gains.
• The company expects to fund its 2026 capital development programs from cash flow from operations, indicating strong operational cash generation.
• The Executive Severance Plan was approved, providing clear benefits for executive officers in certain termination scenarios.

Negatives

• Reported a net loss of $21.6 million in 2025, a significant decline from the $23.5 million net income in 2024.
• Incurred an impairment of long-lived assets of $42.4 million in 2025, primarily due to lower oil prices and higher costs in the Permian Basin joint venture.
• Average realized oil prices (excluding derivatives) decreased by 16% to $61.58/Bbl in 2025, impacting oil revenues.
• Production expenses increased by 24% to $186.2 million in 2025, and on a per Boe basis, rose to $18.05 from $17.56.
• Depreciation, depletion, and amortization (DD&A) increased by 84% to $96.6 million in 2025, and on a per Boe basis, rose to $9.36 from $6.12.
• General and administrative (G&A) expenses increased by 48% to $21.5 million in 2025, and on a per Boe basis, rose to $2.08 from $1.70.
• Interest expense more than doubled to $17.0 million in 2025, reflecting increased borrowings.
• Negative net working capital of $71.8 million at December 31, 2025, primarily due to the $70.0 million deferred payment for the WRE Acquisition.
• Cash Available for Distribution decreased to $54.8 million in 2025 from $79.1 million in 2024.
• No proved undeveloped reserves were converted to proved developed reserves in 2023, 2024, or 2025, indicating a potential lag in PUD development despite capital expenditures.

Risks

• Commodity price volatility significantly affects financial condition, results of operations, and cash available for distribution.
• Failure to replace produced reserves will lead to declining revenues and production, adversely affecting cash flow and distributions.
• Prolonged depressed commodity prices could render production uneconomic, causing downward adjustments to reserve estimates and property write-downs.
• Drilling and producing oil, natural gas, and NGLs are high-risk activities with many uncertainties, including unexpected drilling conditions, regulatory delays, equipment failures, and adverse weather.
• Declining general economic, business, or industry conditions and inflation may materially adversely affect results of operations, liquidity, and financial condition.
• Events outside of control, such as epidemics or public health events, could materially adversely affect business, liquidity, financial condition, results of operations, cash flows, and ability to pay distributions.
• Exposure to credit risk and market risk from opportunistic use of derivative instruments for commodity price hedging.
• Credit Facility restrictions and financial covenants may limit business and financing activities and ability to pay distributions.
• Reserve estimates depend on many assumptions that may ultimately be inaccurate, materially affecting quantities and present value of reserves.
• Concentration of operations in the Permian, San Juan, and Williston Basins makes the company vulnerable to regional adverse industry developments, supply/demand factors, and capacity constraints.
• Inability to make accretive acquisitions or successfully integrate acquired businesses or assets may disrupt business and hinder growth potential.
• Properties acquired may not produce as projected, and the company may be unable to determine reserve potential or identify liabilities.
• Increased costs of capital, including rising interest rates, could adversely affect business, limit access to capital, and reduce cash flows.
• Significant indebtedness increases borrowing costs and reduces flexibility to respond to changing conditions.
• Drilling locations may not yield commercially viable quantities of oil, natural gas, or NGLs.
• Losses may be incurred due to title defects in properties.
• Shared control over the Cross Timbers joint venture may lead to conflicts of interest with the XTO Entities.
• Reliance on third-party operators for non-operating interests means inability to control operation and profitability of such properties.
• Extreme weather conditions and other climatic phenomena could adversely affect drilling activities.
• Stringent federal, state, and local environmental and occupational health and safety laws and regulations could increase costs or expose to significant liabilities.
• Risks arising from the threat of climate change could result in increased operating costs, limit exploration/production areas, and reduce demand for products.
• Scrutiny related to ESG matters and conservation measures may adversely impact business.
• Increased activism against oil and gas exploration and development activities could lead to permit delays, operational restrictions, and increased costs.
• Prolonged negative investor sentiment toward upstream natural gas and oil companies could limit access to capital funding.
• Conservation measures and technological advances could reduce demand for oil, natural gas, and NGLs.
• Federal, state, and local legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and operating restrictions or delays.
• Restrictions on drilling activities to protect wildlife may adversely affect ability to conduct operations.
• Third parties relied upon for transportation services are subject to complex laws that could affect costs or feasibility of business.
• Derivatives regulation could adversely affect ability to use derivative contracts to reduce risks.
• Involvement in legal proceedings could result in substantial liabilities not fully covered by insurance.
• Limitations or restrictions on ability to obtain or dispose of water may adversely affect operating results.
• General partner and its affiliates own a controlling interest and may have conflicts of interest, favoring their own interests.
• Partnership agreement replaces general partner's fiduciary duties with contractual standards, limiting remedies for unitholders.
• General partner may amend partnership agreement to redeem units of certain non-citizen unitholders.
• Unitholders have limited voting rights and cannot elect the general partner or its board.
• General partner has a limited call right that may require unitholders to sell common units at an undesirable time or price.
• Unitholders are limited in their ability to remove the general partner without its consent.
• Control of the general partner may be transferred to a third party without unitholder consent.
• General partner may elect to convert or restructure the partnership to a corporation for U.S. federal income tax purposes without unitholder consent.
• Unlimited additional units, including senior units, may be issued without unitholder approval, potentially diluting ownership and distributions.
• NYSE does not require compliance with certain governance requirements applicable to corporations, reducing unitholder protections.
• Tax treatment depends on partnership status; if treated as a corporation or subject to entity-level taxation, cash for distributions could be reduced.
• Unitholders may be required to pay taxes on income share even without cash distributions.
• Tax gains or losses on disposition of common units could be more or less than expected, with potential ordinary income recapture.
• Unitholders may be subject to limitations on deducting interest expense incurred by the company.
• Tax-exempt entities face unique tax issues, including unrelated business taxable income.
• Non-U.S. unitholders will be subject to U.S. taxes and withholding on income and gain.
• IRS challenges to valuation methodologies for income/loss allocation could adversely affect unit value.
• Unitholders may be subject to state and local taxes and filing requirements in states where they do not live.
• Securities loans of common units may be considered a disposition for tax purposes, leading to gain recognition.

Future Outlook

The company anticipates continued volatility in crude oil and natural gas markets throughout 2026. It plans to fund its approximately $70 million 2026 capital development programs primarily from cash flow from operations. Management intends to dynamically allocate funds to achieve the highest projected economic returns on capital, pursue strategic acquisitions, and support cash distributions. The company may modify its capital budget or cash balances to shift funds towards distributions, and may utilize public equity or debt markets for future acquisitions. Inflationary pressures on costs are expected to continue for the foreseeable future.

Management Comments

• "We expect the crude oil and natural gas markets will continue to be volatile in the future."
• "With our anticipated cash flows from our long-lived property base, we intend to provide dynamic allocation of funds to prudently meet our goals."
• "These goals include the highest projected economic returns on our capital budget, acquisition opportunities that fulfill our strategy, and cash distributions for the life of our legacy assets."
• "From time to time, we may choose to prioritize the repayment of debt incurred in acquisitions to support the longer-term financial stewardship of our business."
• "At other times, given fluctuations in industry costs and commodity prices, we may modify our capital budget or cash balances to shift funds towards cash distributions."
• "We will use all of these tools to support our underlying strategy as a production and distribution enterprise."
• "We continue to undertake actions and implement plans to address these pressures and protect the requisite access to commodities and services, however, these mitigation efforts may not succeed or be insufficient."
• "We are working closely with other suppliers and contractors to ensure availability of supplies on site, especially fuel, steel and chemical supplies which are critical to many of our operations."
• "Based on current commodity prices and our drilling success rate to date, we expect to be able to fund our distributions, meet our debt obligations and fund our 2026 capital development programs from cash flow from operations."

Industry Context

StockSavvy.ai notes that TXO Partners operates within a highly cyclical and volatile oil and natural gas industry, where commodity prices are subject to significant fluctuations due to global economic conditions, geopolitical events (e.g., Middle East hostilities, Ukraine conflict), and supply-demand dynamics (e.g., OPEC output cuts). The company's strategic focus on conventional assets in established basins like the Permian, San Juan, and Williston aims to leverage lower geologic risk and stable production, a contrast to some industry players pursuing higher-risk, higher-reward unconventional plays. The increasing regulatory landscape around climate change, including methane emissions and ESG disclosures, presents a growing challenge for the entire sector, potentially increasing compliance costs and impacting capital access. The industry is also grappling with persistent inflationary pressures on operating and capital costs, which TXO Partners acknowledges and is attempting to mitigate.

Comparison to Industry Standards

• The filing indicates that the oil and natural gas industry is intensely competitive, with many larger companies possessing substantially greater financial, technical, and personnel resources. These larger competitors often engage in midstream and refining operations, providing a more integrated business model.
• The company's concentration in the Permian, San Juan, and Williston Basins makes it vulnerable to regional supply/demand factors and regulatory changes, unlike more geographically diverse competitors.
• The company's average realized oil price (excluding derivatives) of $61.58/Bbl in 2025 was significantly lower than the average NYMEX WTI price of $64.73/Bbl, reflecting typical differentials but also a notable decline from prior years' realized prices.
• The average realized natural gas price (excluding derivatives) of $2.65/Mcf in 2025 was below the average NYMEX Henry Hub price of $3.62/MMBtu, indicating regional basis differentials common in the industry, particularly for San Juan Basin gas.
• The company's production decline rates for Permian (6%), San Juan (8%), and Williston (20%) Basins are within typical ranges for conventional and unconventional plays in those regions, with the Williston Basin's higher decline rate reflecting its non-conventional asset base.
• Customer concentration with Chevron USA, Gunvor USA, and Plains All American accounting for over 42% of total revenues in 2025 is a common industry characteristic, but also a risk factor for smaller producers.

Management Changes

Corporate Governance

Legal Proceedings

• The company is party to lawsuits arising in the ordinary course of business, such as title, royalty or contractual disputes, regulatory compliance matters, and personal injury or property damage matters.
• Management believes it is remote that pending or threatened legal matters will have a material adverse impact on the company's financial condition.
• The company is subject to routine litigation, disputes, or claims related to business activities, including workers' compensation claims and employment-related disputes, none of which are expected to have a material adverse effect.

Related Party Transactions

• Earned management fees from the Cross Timbers joint venture of $5.2 million for the year ended December 31, 2025.
• Occupies a building owned by MorningStar Capital LLC, a limited liability company owned by Bob R. Simpson (Chairman of the Board), and paid $0.6 million in property taxes and repairs/maintenance on its behalf in 2025 in lieu of rent.

Stakeholder Impact

• **Shareholders:** Experienced a net loss and decreased Cash Available for Distribution in 2025, potentially impacting future distribution levels and unit price. However, significant reserve and production growth, along with strategic acquisitions, could provide long-term value. The 2025 equity offering diluted existing unitholders.
• **Employees:** Executive officers benefited from new phantom unit grants and the adoption of an Executive Severance Plan, providing compensation and termination protections. Overall employee relations are deemed satisfactory.
• **Customers:** Sales concentration with three major purchasers (Chevron USA, Gunvor USA, Plains All American) for over 42% of revenues in 2025 poses a risk if any relationship is lost, though the company believes alternative purchasers are available.
• **Creditors:** Increased borrowings under the Credit Facility to $284.0 million and a negative net working capital position of $71.8 million indicate higher leverage and potential liquidity strain, though the borrowing base was increased and covenants were in compliance.
• **Suppliers:** Inflationary pressures on commodity costs (steel, chemicals), transportation, fuel, and wages are increasing operating costs, which could impact supplier relationships and pricing.

Next Steps

• Close the Cross Timbers Transactions in the second quarter of 2026.
• Pay the $70.0 million deferred payment for the WRE Acquisition by July 31, 2026.
• Execute the approximately $70 million development budget for 2026, primarily funded by cash flow from operations.
• Drill or participate in the drilling of approximately 14 gross wells in the Permian Basin, 22 gross wells in the San Juan Basin, and 9 gross wells in the Williston Basin during 2026.
• Recomplete approximately 7 gross wells in the Permian Basin and 4 gross wells in the Williston Basin in 2026.
• Drill and complete or participate in approximately 19 PUD locations during 2026, 15 during 2027, 6 during 2028, 10 during 2029, and 7 during 2030.
• Continue to monitor and potentially modify capital budget or cash balances based on industry costs and commodity prices to support distributions.
• Address potential impacts of evolving environmental regulations, including WOTUS and methane emissions rules, and related legal challenges.
• The Compensation Committee will approve grants of 632,353 time-vesting phantom units and 510,552 performance-vesting phantom units in January 2026.

Key Dates

Recommendation

The company's 2025 performance presents a mixed picture. While significant production growth and strategic acquisitions in the Williston Basin are positive indicators for future operational scale and reserve life, the reported net loss, substantial impairment charges, and increased operating and interest expenses raise concerns about profitability and capital efficiency. The decrease in Cash Available for Distribution is also a notable negative for a partnership structure focused on distributions. The company's ability to fund its 2026 capital program from cash flow is a strength, but the reliance on external financing for future acquisitions and the inherent volatility of commodity prices, coupled with regulatory uncertainties, suggest a 'hold' recommendation. Investors should monitor the successful integration of acquired assets, the realization of proceeds from the Cross Timbers sale, and the company's ability to manage costs and improve net income in a volatile market.

Keywords

Oil and Gas, Exploration and Production, Permian Basin, San Juan Basin, Williston Basin, Energy, Commodity Prices, Reserves, Acquisitions, Capital Expenditures, Partnership, SEC Filing, 10-K, Financial Results, Hedging, Environmental Regulations, Corporate Governance