TXO Partners Eyes Higher 2027 Distributions as Williston Drilling Gains Momentum

Key Points

• TXO expects higher distributions in 2027: The company does not plan to raise its distribution in 2026 but is targeting the ability to pay $1.60 per unit over the next 12 months and anticipates an increase in 2027.
• Williston drilling is becoming a major growth driver: TXO is shifting from refracturing older Elm Coulee wells toward longer-lateral horizontal drilling, with seven wells planned for 2026 and more than 100 additional drilling locations identified.
• Capital and leverage remain disciplined: TXO expects 2026 capital spending of roughly $80 million to $90 million, aims to maintain debt at one to two times, and plans to hedge about 50% of production while remaining cautious on launching San Juan Mancos development.

TXO Partners NYSE: TXO is positioning itself as a “production and distribution company” focused on generating cash distributions while selectively investing in a portfolio spanning the Permian, San Juan and Williston basins, Co-CEO and CFO Brent W. Clum said at an EnerCom presentation.

Clum said the company’s board and insiders own about one-third of its stock, which he said supports a long-term ownership mindset. He described TXO’s strategy as similar to the acquire-and-exploit approach used at XTO Energy, the predecessor business sold to Exxon for $41 billion in 2010.

“We were not interested in being bigger. We were interested in making a more valuable company,” Clum said, citing high-margin assets, lower operating costs and sustainable distributions as the company’s priorities.

Portfolio built across three basins

TXO has approximately 520,000 net acres across the Permian, San Juan and Williston basins, along with roughly $1 billion in proved developed producing, or PDP, assets, according to Clum. The company estimates its portfolio’s long-term decline rate at about 12% and said it seeks to keep that rate below 15%.

Clum said the company repositioned its portfolio beginning in 2020, acquiring assets in the San Juan Basin that year and two Permian assets from Chevron in 2021. TXO went public in 2023 and subsequently expanded into Montana’s Elm Coulee area of the Williston Basin, including through its White Rock acquisition in 2025.

The company also has moved to unwind a joint venture with Exxon after completing the White Rock transaction. Clum said TXO entered transactions with three buyers, with the final transaction closing in May. The full effect of the transactions would appear on the balance sheet at the end of the second quarter, with a clearer view expected by the third quarter.

TXO intends to operate with debt of roughly one to two times through commodity cycles and transactions, although Clum said its preferred leverage level is closer to one to 1.25 times.

Williston development shifts toward new drilling

In the Williston Basin, TXO initially expected Elm Coulee development to center largely on refracturing older wells. Instead, the company has concluded that advances in horizontal drilling and completion technology allow for broader redevelopment of the field, Clum said.

The field was originally developed with open-hole completions and lateral lengths of up to 5,000 feet. TXO drilled three organic wells in 2025 with average lateral lengths of about 10,000 feet. In 2026, the company plans seven organic wells with average lateral lengths of nearly 15,000 feet.

Clum said all seven wells were already drilled, one had been completed, and the company expected all seven to be hydraulically fractured and online by the end of October. The program also is shifting from single-well pads toward multi-well pads, with six of the seven planned wells located on two-well pads. TXO expects two- and three-well pad development in 2027.

The company estimates it has more than 100 additional drilling locations with lateral lengths ranging from 15,000 to 20,000 feet. Clum said initial wells have outperformed the company’s type curve and that refracturing remains an opportunity alongside new drilling.

San Juan Mancos remains a future option

TXO holds nearly 60,000 acres in the New Mexico portion of the Mancos formation in the San Juan Basin. Clum said the company has repeatedly considered launching a two- to four-well Mancos development program but has deferred it due to commodity prices and unfavorable basin pricing differentials.

The company said it would likely require a realized basin price of $3.50 to $4 for the development to proceed. At present, Clum said a program is “probably not going to be” launched in 2027 unless commodity markets change.

TXO has nevertheless spent non-producing capital during 2026 to build infrastructure for future development. Clum said the company could potentially develop the asset with a partner or through a farm-in arrangement, given the capital required to fully exploit the acreage.

The existing San Juan asset is supported by traditional production of about 45 barrels per day, while the Permian portfolio includes the Vacuum Field carbon dioxide flood operation. Clum said the Permian asset has a decline rate of roughly 6%, helping offset higher decline rates associated with growth investments elsewhere in the portfolio.

Capital spending, distributions and hedging

TXO expects capital expenditures of about $80 million this year, potentially rising closer to $90 million as it considers additional refracturing and well cleanout work. Clum said the company generally views about 40% of its capital budget as growth capital, intended to increase production by one to two percentage points annually at the margin.

The company’s variable distribution strategy is actively managed to avoid sharp quarter-to-quarter changes, he said. TXO paid a $0.30 distribution last November, followed by $0.36 in the March quarter and $0.40 in the most recent quarter. Management is targeting the ability to generate a $1.60 distribution over the next 12 months, according to Clum.

Clum said TXO is expected to be heavily hedged in 2026, particularly on oil, after management sought to protect its balance sheet and distributions following the White Rock acquisition and a deferred payment that was due at the end of July and has since been paid. Looking ahead, he said the company expects to hedge about 50% of production on a molecule basis, consistent with its bank facility requirements and leverage targets.

While Clum said TXO does not expect to increase its distribution in 2026, he said management expects to do so in 2027.

About TXO Partners (NYSE:TXO)

TXO Partners is an independent upstream oil and natural gas company focused on the acquisition, development and production of unconventional resource plays in the United States. The firm holds working interests in producing and non-producing acreage, primarily targeting liquids-rich areas to optimize cash flow generation and capital efficiency. Its core business involves identifying under-developed assets, engineering cost-effective drilling programs and applying advanced completion techniques to enhance well performance.

The company’s operations are concentrated in key domestic basins, where horizontal drilling and multi-stage fracturing have unlocked significant reserves.

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