Texas Pacific Land Corporation (TPL) Cash Flow Statement

The OCF/NI ratio has consistently exceeded 1.0 in most quarters, with 2026Q2 at 2.18, indicating that reported earnings are backed by strong cash generation. The positive working capital changes in recent quarters, such as $13.5M in 2026Q2, suggest efficient collection of receivables and minimal inventory, typical of a royalty-based business. This high conversion quality implies that net income is not inflated by non-cash accruals, reinforcing the reliability of TPL's earnings.

The FCF margin expanded from 40.2% in 2025Q4 to 124.2% in 2026Q2, driven by a 31.2% revenue increase and modest capex. This trajectory suggests that TPL's asset-light model is scaling efficiently, with cash flow growing faster than revenue. The gap between FCF and net income widened to $151.8M in 2026Q2, indicating that cash generation is outpacing accounting earnings, which may support increased capital returns or strategic investments.

Excluding the anomalous 2024Q4 spike of $288.5M, capex has been consistently below 14% of revenue, with 2026Q2 at 11.9% due to a $29.2M investment. This suggests that most capex is growth-oriented, likely for infrastructure supporting Permian development, rather than maintenance. The low capital intensity relative to peers like VNOM, which has negative FCF margins, highlights TPL's competitive advantage in generating cash without heavy reinvestment.

The working capital swings have been modest, ranging from -$41.2M to +$26.0M, reflecting the simplicity of TPL's royalty model with no inventory and limited receivables. The positive changes in recent quarters suggest that cash collections are accelerating, possibly due to higher royalty volumes. This efficiency supports the high OCF/NI ratio and indicates that TPL does not require significant working capital investment to grow.

Dividend payments have grown steadily from $26.9M in 2024Q1 to $83.2M in 2026Q2, reflecting a commitment to returning cash to shareholders. However, the $110.2M acquisition outflow in 2026Q2, following a $71.1M inflow in 2025Q3, suggests active portfolio management, possibly acquiring mineral interests. The combination of dividends and acquisitions, funded by robust FCF, indicates a balanced capital deployment strategy that may enhance long-term value.

The cumulative OCF/NI ratio of 1.24 indicates that TPL's earnings are more than fully backed by cash, with the excess likely due to non-cash items like D&A and favorable working capital changes. This divergence suggests that TPL's royalty model generates cash well above accounting profits, providing a cushion for distributions and investments. Investors should monitor whether this trend persists, as it may indicate sustainable cash generation capacity.