TXO Revenues Surge 42% Y/Y, Net Income Halves Amid Acquisition Spree

TL;DR

**TXO's revenue growth is impressive, but the declining net income and rising debt make it a risky bet until they prove they can integrate acquisitions profitably.**

AI Summary

TXO Partners, L.P. reported a significant increase in total revenues for the nine months ended September 30, 2025, reaching $275.08 million, up from $193.48 million in the prior year, primarily driven by higher oil and natural gas sales. Despite this revenue growth, net income decreased to $6.63 million for the nine-month period in 2025, compared to $13.28 million in 2024, largely due to increased expenses including production, depreciation, depletion, and amortization. The company completed the White Rock Energy, LLC acquisition in July 2025 for $338.6 million, adding $11.5 million in revenues and $2.5 million in net income for the three months ended September 30, 2025. Long-term debt increased substantially from $157.1 million at December 31, 2024, to $271.1 million at September 30, 2025, partly funding acquisitions. The borrowing base on their credit facility was increased from $275 million to $410 million in July 2025, extending the maturity to August 30, 2029. Cash and cash equivalents decreased from $7.31 million to $5.31 million over the nine-month period.

Why It Matters

For investors, TXO's aggressive acquisition strategy, evidenced by the $338.6 million White Rock Energy acquisition, is driving significant revenue growth but also escalating debt and expenses, impacting net income. The increased borrowing base to $410 million provides liquidity for future growth but also signals higher leverage. Employees and customers might see stability from expanded operations, but the competitive landscape in the Permian and San Juan Basins remains intense, requiring efficient integration of new assets to maintain profitability. The market will be watching how TXO manages its increased debt load and integrates these acquisitions to translate revenue growth into sustainable net income.

Risk Assessment

Risk Level: medium — The company's net income for the nine months ended September 30, 2025, decreased by 50% to $6.63 million from $13.28 million in the prior year, despite a 42% increase in total revenues. Long-term debt significantly increased from $157.1 million at December 31, 2024, to $271.1 million at September 30, 2025, indicating higher leverage and potential interest rate sensitivity, even with compliance with debt covenants.

Analyst Insight

Investors should closely monitor TXO's upcoming earnings reports for signs of improved profitability and successful integration of recent acquisitions. While revenue growth is strong, the halving of net income and increased debt warrant caution. Consider waiting for evidence of sustained positive net income and debt reduction before making a significant investment.

Financial Highlights

debt To Equity

0.37

revenue

$275.08M

operating Margin

-1.3%

total Assets

$1,376.16M

total Debt

$271.1M

net Income

$6.63M

eps

$0.14

gross Margin

33.7%

cash Position

$5.31M

revenue Growth

+42.1%

Revenue Breakdown

Key Numbers

• $275.08M — Total Revenues (Increased from $193.48 million for the nine months ended September 30, 2024, a 42% increase.)
• $6.63M — Net Income (Decreased from $13.28 million for the nine months ended September 30, 2024, a 50% decrease.)
• $338.6M — WRE Acquisition Cost (Cash consideration for the White Rock Energy, LLC acquisition completed in July 2025.)
• $271.1M — Long-term Debt (Increased from $157.1 million at December 31, 2024, representing a 72.5% increase.)
• $410M — Credit Facility Borrowing Base (Increased from $275 million in July 2025, extending maturity to August 30, 2029.)
• $5.31M — Cash and Cash Equivalents (Decreased from $7.31 million at December 31, 2024.)
• $0.14 — Diluted Net Income Per Common Unit (Decreased from $0.39 for the nine months ended September 30, 2024.)
• 54,784,292 — Common Units Outstanding (As of November 4, 2025.)
• $11.5M — WRE Acquisition Revenues (Revenues contributed by the WRE Acquisition for the three months ended September 30, 2025.)
• $2.5M — WRE Acquisition Net Income (Net income contributed by the WRE Acquisition for the three months ended September 30, 2025.)

Key Players & Entities

• TXO Partners, L.P. (company) — registrant
• White Rock Energy, LLC (company) — acquired company
• JPMorgan Chase Bank, N.A. (company) — administrative agent for credit facility
• Cross Timbers Energy, LLC (company) — joint venture partner
• MorningStar Oil & Gas, LLC (company) — sole member of General Partner
• Exxon Mobil Corporation (company) — parent of offshore subsidiary with note receivable
• Eagle Mountain Energy Partners (company) — seller in EMEP Acquisition
• VR 4-ELM, LP (company) — seller in EMEP Acquisition
• Kaiser-Francis Oil Company (company) — seller in KFOC Acquisition
• SEC (regulator) — U.S. Securities and Exchange Commission

FAQ

Risk Factors

• Increased Indebtedness [high — financial]: Long-term debt increased by 72.5% from $157.1 million to $271.1 million, primarily to fund acquisitions like White Rock Energy, LLC. This higher leverage amplifies financial risk and increases interest expense, which rose from $3.885 million to $10.697 million for the nine-month period.
• Production Cost Increases [medium — operational]: Production expenses increased by 22.5% to $133.469 million for the nine months ended September 30, 2025, compared to $108.959 million in the prior year. This rise in operating costs, alongside higher depreciation, depletion, and amortization expenses (up 94% to $66.810 million), significantly impacted profitability.
• Commodity Price Volatility [medium — market]: Revenues are heavily dependent on fluctuating oil and natural gas prices. While prices were favorable in the reported periods, a downturn could negatively impact revenue and cash flows, especially with increased debt servicing obligations.
• Reduced Cash Position [medium — financial]: Cash and cash equivalents decreased from $7.31 million at year-end 2024 to $5.31 million as of September 30, 2025. This reduction, coupled with increased debt, could limit financial flexibility for future investments or unexpected expenditures.
• Integration of Acquisitions [medium — operational]: The successful integration of the White Rock Energy, LLC acquisition is crucial. While it contributed $11.5 million in revenues and $2.5 million in net income for the three months ended September 30, 2025, failure to achieve expected synergies or operational efficiencies could hinder overall performance.
• Environmental Regulations [low — regulatory]: The company's operations are subject to stringent environmental regulations related to oil and gas exploration and production. Changes in regulations or increased compliance costs, including asset retirement obligations which increased to $205.426 million, could adversely affect financial results.

Industry Context

The oil and gas industry is characterized by cyclical commodity prices, significant capital intensity, and evolving regulatory landscapes. Companies like TXO Partners operate in a competitive environment, focusing on exploration, production, and strategic acquisitions to grow reserves and cash flow. Recent trends include consolidation driven by attractive asset prices and a focus on optimizing production from existing fields.

Regulatory Implications

TXO Partners faces regulatory oversight concerning environmental protection, safety, and resource extraction. Compliance with environmental standards, particularly regarding emissions and well integrity, is critical. Changes in tax policies or permitting requirements could also impact operational costs and future development plans.

What Investors Should Do

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Key Dates

• 2025-07-01: Completion of White Rock Energy, LLC Acquisition — Significantly expanded the company's asset base and revenue streams, funded by increased debt.
• 2025-07-01: Increase in Credit Facility Borrowing Base — Enhanced liquidity and financial flexibility, with the base rising to $410 million and maturity extended to August 30, 2029.
• 2025-09-30: End of Nine-Month Period — Reporting period for the 10-Q, showing substantial revenue growth but a decline in net income.
• 2024-12-31: Year-End 2024 — Baseline for comparison of debt and cash positions at the start of the reporting year.

Glossary

Depreciation, Depletion and Amortization

The systematic allocation of the cost of tangible assets (depreciation), natural resources (depletion), and intangible assets (amortization) over their useful lives. In oil and gas, depletion specifically refers to the extraction of natural resources. (A significant expense for TXO, increasing by 94% to $66.810 million for the nine months ended September 30, 2025, impacting net income.)

Successful Efforts Method

An accounting method for oil and gas companies where exploration costs are capitalized only if they lead to the discovery of proved reserves. Costs that do not result in discovery are expensed. (This method is used by TXO for its property and equipment, influencing the carrying value of its assets on the balance sheet.)

Asset Retirement Obligation

A legal obligation associated with the retirement of tangible long-lived assets, such as plugging and abandoning oil and gas wells. (TXO has a significant and growing ARO, totaling $205.426 million, which includes a current portion of $3.5 million, impacting liabilities and expenses.)

Weighted Average Common Units Outstanding

The average number of common units outstanding during a period, adjusted for the timing of any issuances or repurchases of units. Used to calculate earnings per unit. (The increase in weighted average units from 33,762 to 48,079 for the nine-month period reflects potential unit issuances or the impact of acquisitions on the unit count, affecting EPS.)

Derivative Fair Value

The current market value of financial instruments (like futures or options contracts) used to manage exposure to price fluctuations in commodities or interest rates. (TXO holds derivative instruments, with fair values fluctuating on both the asset and liability sides of the balance sheet, indicating hedging activities.)

Year-Over-Year Comparison

TXO Partners reported a significant 42.1% increase in total revenues to $275.08 million for the nine months ended September 30, 2025, compared to $193.48 million in the prior year, driven by higher oil and natural gas sales. However, net income saw a substantial 50% decrease, falling to $6.63 million from $13.28 million, primarily due to a sharp rise in production and DD&A expenses. Long-term debt also increased significantly by 72.5% to $271.1 million, reflecting the funding of acquisitions, while cash reserves slightly decreased.

Filing Documents

• txo-20250930.htm (10-Q) — 996KB
• ex311txo-q3202510xqsection.htm (EX-31.1) — 8KB
• ex312txo-q3202510xqsection.htm (EX-31.2) — 8KB
• ex321txo-q3202510xqsection.htm (EX-32.1) — 4KB
• ex322txo-q3202510xqsection.htm (EX-32.2) — 4KB
• 0001559432-25-000108.txt ( ) — 6004KB
• txo-20250930.xsd (EX-101.SCH) — 48KB
• txo-20250930_cal.xml (EX-101.CAL) — 57KB
• txo-20250930_def.xml (EX-101.DEF) — 215KB
• txo-20250930_lab.xml (EX-101.LAB) — 553KB
• txo-20250930_pre.xml (EX-101.PRE) — 384KB
• txo-20250930_htm.xml (XML) — 805KB

- Financial Information

Part I - Financial Information

Financial Statements

Item 1. Financial Statements 1 Consolidated Balance Sheets 1 Consolidated Statements of Operations 2 Consolidated Statements of Cash Flows 3 Consolidated Statements of Partners' Capital 4

Notes to Financial Statements

Notes to Financial Statements 5

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 31

Controls and Procedures

Item 4. Controls and Procedures 33

- Other Information

Part II - Other Information

Legal Proceedings

Item 1. Legal Proceedings 34

Risk Factors

Item 1A. Risk Factors 34

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 34

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 34

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 34

Other Information

Item 5. Other Information 34

Exhibits

Item 6. Exhibits 35

Signatures

Signatures 36 i Table of Contents

- Financial Information

Part I - Financial Information

Financial Statements

Item 1. Financial Statements TXO PARTNERS, L.P. Consolidated Balance Sheets (in thousands) September 30, 2025 December 31, 2024 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 5,308 $ 7,305 Accounts receivable, net 45,602 39,689 Derivative fair value 11,095 6,412 Other 14,916 11,041 Total Current Assets 76,921 64,447 Property and Equipment, at cost – successful efforts method: Proved properties 2,308,971 1,912,624 Unproved properties 18,772 18,706 Other 88,894 85,425 Total Property and Equipment 2,416,637 2,016,755 Accumulated depreciation, depletion and amortization ( 1,132,108 ) ( 1,065,364 ) Net Property and Equipment 1,284,529 951,391 Other Assets: Note receivable from related party 7,131 7,131 Derivative fair value 1,203 2,065 Other 6,374 5,807 Total Other Assets 14,708 15,003 TOTAL ASSETS $ 1,376,158 $ 1,030,841 LIABILITIES AND PARTNERS' CAPITAL Current Liabilities: Accounts payable $ 29,664 $ 18,217 Deferred payment 70,000 — Accrued liabilities 47,177 38,927 Derivative fair value 8,481 5,846 Asset retirement obligation, current portion 3,500 2,000 Other current liabilities 1,795 1,347 Total Current Liabilities 160,617 66,337 Long-term Debt 271,100 157,100 Other Liabilities: Asset retirement obligation 205,426 188,904 Derivative fair value 2,115 8,022 Other liabilities 680 1,062 Total Other Liabilities 208,221 197,988 Commitments and Contingencies Partners' Capital: Partners' capital 736,220 609,416 TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,376,158 $ 1,030,841 See accompanying notes to the Consolidated Financial Statements 1 Table of Contents TXO PARTNERS, L.P. Consolidated Statements of Operations (Unaudited) (in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 REVENUES Oil and condensate $ 66,330 $ 56,111 $ 190,379 $ 136,944 Natural gas liquids 7,504 7,195 23,958 20,367 Natural gas 27,042 5,425 60,743 36,167 Total Revenues 100,876 6

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 1. Organization and Summary of Significant Accounting Policies TXO Partners, L.P. (TXO Partners or the Partnership) is an independent oil and gas company that was formed as a Delaware limited partnership in January 2012 (with an effective inception of operations at January 18, 2012). The operations of TXO Partners are governed by the provisions of the partnership agreement, as amended, executed by the general partner, TXO Partners GP, LLC (the General Partner) and the limited partners. The General Partner is the manager and operator of TXO Partners. The General Partner is managed by the board of directors and executive officers of our General Partner. The members of the board of directors of our General Partner are appointed by MorningStar Oil & Gas, LLC ("MSOG"), as the sole member of our General Partner. TXO Partners will remain in existence unless and until dissolved in accordance with the terms of the partnership agreement. TXO Partners' assets include its investment in an unincorporated joint venture, Cross Timbers Energy, LLC ("Cross Timbers Energy"). TXO Partners owns 50 % of Cross Timbers Energy, and TXO Partners is the manager of Cross Timbers Energy. Cross Timbers Energy is governed by a Member Management Committee (MMC) and is comprised of six representatives, three from each group, with each group having one voting member. All matters that come before the MMC require the unanimous consent of the voting members. On the last day of each calendar quarter, Cross Timbers Energy distributes all excess cash to the members based on their ownership percentage of 50 % each, except for earnings from the note receivable which is owned 5 % by TXO Partners. Cross Timbers Energy's properties are located primarily in the San Juan Basin of New Mexico and Colorado and the Permian Basin of West Texas and New Mexico. TXO Partners also has a wholly-owned subsidiary, MorningStar Operating LLC which owns oil and gas a